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Power of SAC in Court JRI Resources SDN BHD V Kuwait Finance House CLJ - 2019 - 5 - 569 Power of SAC in Court
Power of SAC in Court JRI Resources SDN BHD V Kuwait Finance House CLJ - 2019 - 5 - 569 Power of SAC in Court
Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 569
(4) The ruling under s. 57 of the CBMA does not conclude or settle the
dispute between the parties arising from the Islamic financing facility at
hand. It did not ‘determine’ the liability of the borrower under the
Islamic facility. The determination of a borrower’s liability under any
banking facility is decided by the presiding judge and not the SAC. E
Hence, an ‘ascertainment’ exercise which results in a ‘ruling’ must not
be confused with an act of ‘determination’ which results in a final
decision. In the circumstances, question (i)(a) was answered in the
negative. (paras 84, 85 & 89)
F
(5) The separation of powers doctrine is not expressly provided in the FC.
Yet, the doctrine is recognised as an integral element of our
constitutional design. Whilst the functional independence of the three
branches of Government – the Legislature, Judiciary and Executive –
is recognised, there is an overlap and blending of functions, resulting in
complementary activity by the different branches that makes absolute G
separation of powers impossible. The doctrine of separation of powers
is not rigid, fixed or static but continues to evolve. Therefore, the
traditional notion that there are separate and distinct roles for the
executive, legislative and judicial branches of Government which
should remain inviolate has changed over time to reflect their growing H
interrelationship to facilitate the efficient operation of Government.
(paras 94, 95, 99)
(6) The court in the Semenyih Jaya Sdn Bhd v. Pentadbir Tanah Daerah Hulu
Langat & Another Case (‘Semenyih Jaya’) highlighted that the exercise of
judicial power carries two features: (i) that judicial power is exercised I
in accordance with the judicial process of the judicature; and (ii) judicial
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 573
(10) Article 8 of the FC deals with equality before the law and equal A
protection of the law and that equality means that people who are in like
circumstances should be treated equally. Numerous cases in the apex
court confirm that art. 8 does not apply to all persons in any
circumstances but rather it applies to persons under like circumstances.
In the case of a reference made pursuant to s. 56(1)(b) of the CBMA, B
parties involved are allowed to provide their own Shariah expert’s views
on the Shariah questions. In fact, the applicant provided to the SAC its
own Shariah expert’s view on the issue. (paras 150 & 152)
(11) The civil courts are not in a position to appreciate and determine the
divergences of opinions among the experts and to decide based on C
Shariah principles. If the parties are allowed to lead expert evidence, it
would fall upon the civil courts to ascertain what the applicable Islamic
law for the Islamic banking is, and to proceed to apply the ascertained
law to the facts of the case. In ascertaining the law, competing parties
to the dispute would submit their own expert evidence and a civil court D
judge would ultimately have to make a decision as to which expert
opinion to rely on. This could be further complicated if each expert
based his or her opinion on different schools of jurisprudence.
Therefore, it is for a body of eminent jurists, properly qualified in
Islamic jurisprudence and/or Islamic finance, to be the ones dealing E
with questions of validity of a contract under Islamic law and in
Malaysia that special body would be the SAC. (paras 153-158)
Per Azahar Mohamed (concurring):
(1) Item 4(k) of the Federal List, Ninth Schedule of the FC vests legislative
F
competence in Parliament to enact laws aimed at ascertaining Islamic
law and other personal laws for purposes of Federal law. The legal
consequence of the constitutional arrangement is that, the ascertainment
of Islamic law for the purposes of federal law has been assigned by the
FC to a specific branch of Government, that is to say, the legislative
branch. The mandatory wording in the provisions is absolute and does G
not admit any exceptions or exemption. Therefore, in so far as the FC
is concerned, ascertainment of Islamic law for the purposes of Islamic
financial business falls under the legislative power and thus, powers and
discretion on such matters are neither inherent nor integral to the
judicial function. (paras 172, 173) H
(2) Sections 56 and 57 of the CBMA that made the SAC the authority for
the ascertainment of Islamic law with regard to Islamic financial
business was introduced following the rising of the number of disputes
in relation to Islamic banking products in the civil courts. The objective
behind the establishment of the SAC as the ultimate authority for the I
ascertainment of Islamic law is to act as the single point of authoritative
reference to ensure consistency and certainty in the application of
Islamic principles in Islamic financial business. Pursuant to ss. 56 and
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 575
A 57, it is mandatory for the courts to refer to any published rulings of the
SAC and in the absence of such rulings, to refer a question to the SAC
for a ruling on Shariah matters and such rulings shall be binding on the
courts. (paras 180, 192-194 & 198)
(3) The powers of the SAC and the courts to ascertain any Shariah issues
B
that may arise in Islamic banking and financial disputes are for all
intents and purposes powers delegated by Parliament to the SAC and the
courts. As such, ss. 56 and 57 of the CBMA could not and did not
trespass or intrude onto the judicial power; the provisions did not violate
the doctrine of separation of powers. The principle of separation of
C powers did not apply to invalidate any legislative delegation of powers
to the SAC and the courts to ascertain Islamic law for the purposes of
resolving disputes on Islamic financial matters. This is not stripping the
Judiciary of its powers. Neither the Executive nor Legislature usurps or
intrudes the sphere of judicial powers. (paras 201 & 203)
D
Per David Wong Dak Wah CJ (Sabah & Sarawak) (dissenting):
(1) Islamic banking is regulated under the Islamic Financial Services Act
2013 (‘IFSA’). Any licensed institution under IFSA must operate its
business in a way which would not involve any element which is not
approved by the Religion of Islam. In short, all financial transactions of
E
the respondent must be Shariah-compliant. (para 245)
(2) The effect of the SAC ruling, that cl. 2.8 of the Ijarah facilities was
Shariah-compliant, was that the parties were bound by the clause, and
accordingly the cost for the maintenance works were to be borne by the
F applicant. The rights and liabilities of the parties in dispute had been
adjudicated and finally determined by the SAC. There was no
opportunity for the parties to adduce evidence contrary to the SAC
ruling, or to appeal against it. Since the SAC ruling was binding upon
the court, it was artificial to contend that the ruling was not itself
enforceable by the SAC; the court had no option but to incorporate and
G
apply the substance and effect of the ruling in making the order and
delivering the decision. (para 249)
(3) Upon an analysis of the substance and true effect of the SAC’s role in
this case, it was clear that all the three elements of adjudication, finality,
H and enforceability were present and therefore, the role of the SAC under
ss. 56 and 57 would satisfy all the suggested essential characteristics of
judicial power. Even if the function of the SAC did not exhibit the core
characteristics of judicial power, it may arguably be regarded as a
‘borderline’ case. Borderline functions would form part of the judicial
power if they are ancillary or incidental to its exercise. (paras 250 &
I
251)
576 Current Law Journal [2019] 5 CLJ
(4) With the SAC’s binding ruling, the trial judge’s functions of analysing A
the conflicting opinions, as done in every deliberation of a judge in a
trial, had been completely usurped. There was a complete prohibition
on the part of the judge to determine a substantial issue of dispute
between the applicant and the respondent as to the legality of cl. 2.8.
The SAC’s ruling was no more an advice as prior to the enactment of B
ss. 56 and 57. The SAC’s ruling, for all intents and purposes, became
the ruling of the trial judge. Hence, it must be said that the legislative
purpose here was to take away, from the civil courts, the judicial power
and place it with SAC on issues relating to Shariah matters. (para 255)
(5) Though the SAC was not part of the court structure, the two important C
features ie, that: (i) the court is obliged to refer such dispute on Shariah
compliance to the SAC for a ruling; and (ii) the ruling shall bind the
court which includes the appellate courts, make the SAC very much part
of the judicial framework, though not ostensibly but substantially. The
SAC, though should be considered as an expert in Islamic law, had by D
its role of providing a binding ruling on the courts, had in no uncertain
terms stepped into the sphere of judicial function which under the FC
is solely reserved to the civil courts. (para 256)
(6) Sections 56 and 57 had scuttled the rights of a litigant to a fair trial and
to due process. These rights involve the right of a litigant to lead expert E
evidence on matters requiring the same, the right to cross examine the
experts on their expertise and the right to make submissions to assist the
court to form a binding opinion on the litigants. Here, the liability of
the applicant was substantially anchored on cl. 2.8 of the ljarah
agreements and, with the SAC’s binding ruling, the applicant had been F
deprived of its right to lead evidence and argue that cl. 2.8 was forbidden
by law and hence his liability under the agreement was rendered void.
The prohibition of litigants from tendering evidence, be it expert
evidence or otherwise, in a civil trial goes against the grain of the very
notion of fair play, hence breaching one feature of the concept of ‘rule G
of law’. The concept of the rule of law underpins the existence of the
basic human rights provided for in our Federal Constitution and any
legislation which impinges on the concept can and should be struck
down. (paras 257 & 258)
(7) Since the preceding sections relating to the establishment and role of the H
SAC are not impugned, with the striking down of ss. 56 and 57 of the
CBMA 2009, proposed new provisions need to be put in place to
redefine the role of the SAC in respect of Shariah questions in
proceedings relating to Islamic financial business. Where a question
concerning a Shariah matter arises in any proceedings relating to Islamic I
financial business, it was suggested that the court retains the option of
referring such question to the SAC for its opinion. In addition to the
SAC opinion, parties are free to lead expert evidence in support or
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 577
(4) The central issue in the case had been disposed of by virtue of the SAC A
ruling wherein, the ruling was not a general pronouncement on policy
matters for the future, but a determination affecting the rights and
liabilities of the parties. Under s. 57 of the CBMA, the ruling was
binding on the High Court. In substance therefore, the rights and
obligations of the parties in dispute have effectively been determined by B
virtue of the SAC ruling. Further, the facts of the present case were, for
all relevant purposes, virtually indistinguishable from Semenyih Jaya.
The ruling of the SAC was final as regards the issue of whether the clause
was Shariah-compliant. It could not be challenged by the parties with
contrary expert evidence, nor reviewed by the High Court, nor C
overturned on appeal. In exercising this function, the SAC was not
subject to any check and balance mechanism. (paras 311-313 & 317)
(5) The SAC ruling was binding, not on the parties, but on the High Court.
The effect of the SAC ruling would be reflected in the order of the High
Court which it bound. It meant the determination of the SAC on the D
issue referred to it becomes enforceable forthwith. It was impermissible
for the decision of a non-judicial body to take effect as an exercise of
judicial power. It was clear that all three proposed indicia of judicial
power were present, namely, the SAC exercised an adjudicative
function, finally resolved the dispute on the issue of Shariah law, and E
gave a decision which was immediately enforceable. The sting laid in
the ruling being binding on the High Court. The function of the SAC
thus fell clearly within what may be termed the core area of judicial
power. (paras 323, 326 & 327)
(6) Under ss. 56 and 57 of the CBMA, the ascertainment of Islamic law by F
the SAC occurred in the context of an ongoing judicial proceeding before
the High Court. Since the ruling was binding upon the High Court, the
ascertainment became an integral and inextricable part of the judicial
process of determining the rights and liabilities of the parties in dispute.
Thus, even if the SAC’s function was merely one of ascertainment and G
did not exhibit any core feature of judicial power, it could not be
regarded otherwise than as ancillary or incidental to the exercise of
judicial power. In view of its purpose and context, the issuance of a
binding ruling by the SAC undoubtedly fell within the ambit of judicial
power. (paras 340 & 341)
H
(7) The legislative purpose behind the enactment of ss. 56 and 57 of the
CBMA 2009 is commendable. Parliament, in view of a series of
inconsistent court decisions, chose to remove from the court and vest in
the SAC the power to make decisions on Shariah matters in Islamic
finance business. However, commendable purposes of a legislation I
cannot be done at the expense of judicial independence and power. The
constitutional invalidity of s. 57 CBMA, in so far as it vests judicial
power in the SAC, is not absolved by the best intentions of Parliament.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 579
Kesan keputusan tersebut ialah, kl. 2.8 kemudahan Ijarah mematuhi Shariah. A
Pemohon enggan menerima keputusan yang diberi SAC dan memfailkan
permohonan untuk rujukan di Mahkamah Persekutuan menurut per. 128(2)
Perlembagaan Persekutuan (‘PP’) dan s. 84 Akta Mahkamah Kehakiman
1964 untuk menentukan sama ada ss. 56 dan 57 Akta Bank Negara Malaysia
2009 (‘ABNM’), yang bawahnya SAC memberi keputusan, sah dari segi B
perlembagaan. Mahkamah Tinggi menolak permohonan pemohon untuk
rujukan perlembagaan dan oleh itu, pemohon merayu. Mahkamah Rayuan
membenarkan rayuan dan memerintahkan Mahkamah Tinggi membuat
rujukan yang dipohon pemohon. Oleh itu, rujukan di sini. Soalan-soalan
perlembagaan yang dibangkitkan oleh mahkamah tertinggi di sini adalah: C
(i) sama ada ss. 56 & 57 ABNM melanggar PP dan tidak berperlembagaan
kerana: (a) bertentangan dengan per. 74 PP dibaca bersama-sama dengan
Jadual Kesembilan PP kerana SAC diberi hak dengan kuasa menentukan
undang-undang Islam; (b) bertentangan dengan Bahagian IX PP kerana
seksyen-seksyen tersebut mempunyai kesan meletakkan hak kuasa undang-
D
undang pada SAC; atau (c) bertentangan dengan s. 8 PP kerana seksyen-
seksyen tersebut mempunyai kesan menafikan pada seseorang litigan, proses
pengadilan substantif; (ii) jika soalan di atas dijawab secara negatif: (a) sama
ada mahkamah masih berhak menerima atau mempertimbangkan keterangan
pakar tentang apa-apa soalan membabitkan hal perkara Shariah berkenaan
perniagaan berunsurkan kewangan Islam. E
A (2) Akta Bank Negara Malaysia 1958 (‘Akta 1958’) dipinda dengan
memasukkan s. 16B yang mula berkuat kuasa pada 1 Januari 2004.
Menurut s. 16B Akta 1958, tidak mandatori untuk mahkamah merujuk
pada SAC apa-apa prinsip Islam dan/atau Shariah. Walaupun
mahkamah perlu mempertimbangkan keputusan tersebut, mahkamah
B tidak terikat oleh keputusan itu. Tanpa apa-apa keputusan mengikat dan
tetap daripada SAC, wujud keadaan mahkamah-mahkamah membuat
keputusan yang berbeza berkaitan perkara perbankan Islam yang sama.
Percanggahan pendapat antara pakar-pakar dalam prinsip perundangan
Islam menjurus pada ketidaktentuan dalam industri perbankan Islam dan
C
menjejaskan kestabilan sistem kewangan Islam sehingga memudaratkan
ekonomi.
(3) Akta Bank Negara Malaysia meningkatkan peranan dan fungsi SAC.
SAC kini adalah satu-satunya pihak berkuasa untuk penentuan undang-
undang Islam untuk perniagaan berunsurkan kewangan Islam.
D Walaupun setiap institusi kewangan Islam bertanggungjawab
membentuk jawatankuasa Shariah mereka sendiri di peringkat institusi,
mereka perlu mematuhi nasihat SAC berkaitan perniagaan-perniagaan
berunsurkan kewangan Islam. Begitu juga, apabila keputusan
jawatankuasa Shariah berbeza dengan keputusan SAC, keputusan SAC
E
akan mengatasi. Ini selanjutnya menjelaskan kekaburan dan menjadikan
tiada peluang keputusan/nasihat berkonflik diberi oleh jawatankuasa
Shariah.
(4) Keputusan bawah s. 57 ABNM tidak memuktamadkan atau
menyelesaikan pertikaian antara pihak-pihak berikutan kemudahan
F pembiayaan Islam tersebut. Keputusan tersebut tidak ‘memuktamadkan’
liabiliti peminjam bawah kemudahan Islam tersebut. Penentuan liabiliti
bawah apa-apa kemudahan perbankan diputuskan oleh hakim yang
bersidang dan bukan SAC. Oleh itu, pelaksanaan ‘penentuan’ yang
menghasilkan ‘keputusan’ tidak sepatutnya dikelirukan dengan tindakan
G
‘pemutusan’ yang menghasilkan keputusan terakhir. Dalam hal keadaan
itu, soalan (i)(a) dijawab secara negatif.
(5) Doktrin pemisahan kuasa tidak diperuntukkan secara langsung dalam
PP. Tetapi, doktrin itu diiktiraf sebagai unsur penting ciri-ciri
perlembagaan. Sementara kebebasan ketiga-tiga cabang Kerajaan –
H Perundangan, Kehakiman dan Eksekutif – diiktiraf, wujud pertindihan
dan penyatuan fungsi, yang mengakibatkan aktiviti komplemen antara
cabang yang berbeza, menjadikan pemisahan kuasa secara mutlak
mustahil dicapai. Doktrin pemisahan kuasa tidak tegar, tetap atau statik
tetapi terus berkembang. Oleh itu, tanggapan tradisi bahawa wujud
I
peranan terpisah dan berasingan cabang-cabang Eksekutif, Perundangan
dan Kehakiman Kerajaan yang wajar kekal tanpa dicemari telah berubah
mengikut masa untuk menggambarkan hubung kait yang berkembang
untuk memudahkan operasi Kerajaan secara cekap.
582 Current Law Journal [2019] 5 CLJ
(6) Mahkamah ini dalam kes Semenyih Jaya Sdn Bhd v. Pentadbir Tanah A
Daerah Hulu Langat & Another Case (‘Semenyih Jaya’) menekankan dua
ciri-ciri pelaksanaan kuasa kehakiman: (i) bahawa kuasa kehakiman
dilaksanakan mengikut proses penghakiman oleh Kehakiman; dan
(ii) kuasa kehakiman meletak hak hanya pada satu-satu orang yang
dilantik memegang kuasa kehakiman dan dengan itu, orang yang tidak B
mempunyai kuasa kehakiman tiada hak untuk melaksanakan kuasa
kehakiman. SAC tiada ciri-ciri kuasa kehakiman seperti yang dinyatakan
dalam kes Semenyih Jaya. Keputusan SAC terhad hanya pada isu
Shariah. Hakim yang bersidang yang membuat rujukan pada SAC akan
melaksanakan kuasa kehakimannya dan memutuskan kes tersebut C
berdasarkan keterangan yang dikemukakan di mahkamah. Oleh sebab
tiada kuasa kehakiman yang diletak pada SAC, SAC tidak merampas
kuasa kehakiman mahkamah.
(7) Seksyen 56(1) ABNM memberi pilihan pada mahkamah atau penimbang
tara sama ada hendak menimbangkan keputusan SAC yang diterbitkan D
atau merujuk isu Shariah pada SAC untuk keputusan. Perkataan ‘atau’
dalam seksyen itu menandakan pilihan sebegitu diperuntukkan pada
mahkamah atau penimbang tara. Frasa ‘membuat pertimbangan’ dalam
seksyen itu menyiratkan bahawa hanya mahkamah atau penimbang tara
mempunyai kuasa kehakiman eksklusif untuk menentukan kes dengan E
mengguna pakai keputusan SAC pada fakta kes di hadapan mereka.
(8) Parlimen berkompeten untuk meletak hak fungsi penentuan undang-
undang Islam berkaitan perbankan Islam pada SAC dan penentuan
sedemikian mengikat mahkamah. Walau bagaimanapun, penentuan
undang-undang Islam tidak menyelesaikan pertikaian antara pihak-pihak F
di mahkamah. SAC tidak memutuskan secara muktamad pertikaian
antara pihak-pihak dan tidak terlibat dalam kuasa kehakiman
menentukan hak pihak-pihak. Apabila memberi keputusan bawah s. 57,
SAC betul-betul mematuhi prinsip dalam buku panduan yang
dikeluarkan Bank Negara bertajuk Manual for References to Shariah G
Advisory Council by the Civil Court and Arbitrator. SAC ialah jentera
Perundangan untuk membantu menyelesaikan pertikaian dalam
perbankan Islam. SAC tidak melaksanakan langsung kuasa kehakiman.
Oleh itu, terbuka pada Perundangan untuk menubuhkan SAC sebagai
sebahagian statut kawal atur dan meletak hak padanya dengan kuasa
H
untuk menentukan undang-undang Islam untuk tujuan perbankan.
(9) Keputusan-keputusan SAC dibuat melalui pelaksanaan ijtihad bersama.
SAC terdiri daripada cendekiawan-cendekiawan Islam dan pakar-pakar
kewangan Islam, yang adalah individu-individu berkelayakan dengan
pengalaman dan pengetahuan luas dalam berbagai bidang, khususnya I
kewangan dan undang-undang Islam, untuk memastikan pertimbangan
kukuh dan komprehensif sebelum keputusan dikeluarkan. SAC
mengharmonikan pertimbangan pendapat-pendapat Shariah dalam
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 583
(2) Seksyen 56 dan 57 ABNM yang menjadikan SAC pihak berkuasa untuk
menentukan undang-undang Islam berkaitan perniagaan berunsurkan
kewangan Islam diperkenalkan berikutan peningkatan jumlah pertikaian
berkaitan dengan produk-produk perbankan Islam di mahkamah-
mahkamah sivil. Objektif di sebalik penubuhan SAC sebagai kuasa C
tertinggi untuk penentuan undang-undang Islam adalah untuk bertindak
sebagai satu-satunya pusat rujukan autoritatif untuk memastikan
kekonsistenan dan kepastian penggunaan prinsip-prinsip Islam dalam
perniagaan kewangan Islam. Menurut ss. 56 dan 57, adalah mandatori
untuk mahkamah-mahkamah merujuk mana-mana keputusan SAC yang D
diterbitkan dan dalam ketiadaan keputusan sedemikian, untuk merujuk
soalan kepada SAC untuk keputusan berkaitan perkara-perkara Shariah
dan keputusan demikian mengikat mahkamah.
(3) Kuasa-kuasa SAC dan mahkamah-mahkamah untuk menentukan isu-isu
Shariah yang mungkin berbangkit dalam pertikaian perbankan dan E
kewangan Islam adalah, untuk semua niat dan tujuan, kuasa-kuasa yang
diberi oleh Parlimen kepada SAC dan mahkamah-mahkamah. Oleh itu,
ss. 56 dan 57 ABNM tidak boleh dan tidak mencerobohi atau
mengganggu kuasa kehakiman; peruntukan-peruntukannya tidak
mencabul doktrin pemisahan kuasa. Prinsip pemisahan kuasa tidak F
terpakai untuk menidaksahkan apa-apa pemberian kuasa perundangan
kepada SAC dan mahkamah-mahkamah untuk menentukan undang-
undang Islam untuk menyelesaikan pertikaian berkaitan perkara-perkara
kewangan Islam. Ini bukan bermaksud melucutkan kuasa-kuasa
mahkamah. Eksekutif atau Perundangan juga tidak merampas atau G
mengganggu lingkungan kuasa-kuasa kehakiman.
Oleh David Wong Dak Wah HB (Sabah & Sarawak) (menentang):
(1) Perbankan Islam dikawal bawah Akta Perkhidmatan Kewangan Islam
2013 (‘APKI’). Mana-mana institusi berlesen bawah APKI mesti
menjalankan perniagaannya secara yang tidak melibatkan apa-apa H
elemen yang tidak diluluskan oleh agama Islam. Secara singkatnya,
kesemua transaksi kewangan responden mestilah mematuhi Shariah.
(2) Kesan keputusan SAC, bahawa kl. 2.8 kemudahan Ijarah mematuhi
Shariah, adalah bahawa pihak-pihak terikat dengan klausa tersebut, dan
I
dengan itu, kos kerja-kerja penyelenggaraan akan dipikul oleh pemohon.
Hak-hak dan liabiliti-liabiliti pihak-pihak dalam pertikaian telah
diputuskan dan dimuktamadkan oleh SAC. Tiada peluang untuk pihak-
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 585
menghujahkan bahawa kl. 2.8 dilarang oleh undang-undang dan oleh itu, A
liabilitinya bawah perjanjian terbatal. Larangan terhadap litigan-litigan
untuk mengemukakan keterangan, sama ada keterangan pakar atau
sebaliknya, dalam perbicaraan sivil bertentangan dengan asas tanggapan
keadilan, dengan itu melanggar salah satu ciri-ciri konsep ‘kedaulatan
undang-undang’. Konsep kedaulatan undang-undang menguatkan B
kewujudan hak-hak asasi manusia yang diperuntukkan dalam PP dan
apa-apa perundangan yang mencerobohi konsep tersebut boleh dan wajar
dibatalkan.
(7) Oleh sebab seksyen-seksyen berkaitan dengan penubuhan dan peranan
SAC tidak dipersoalkan, dengan pembatalan ss. 56 dan 57 ABNM, C
peruntukan-peruntukan baru yang dicadangkan perlu dikemukakan
untuk mentafsirkan semula peranan SAC berkaitan dengan soalan-soalan
Shariah dalam prosiding berkaitan perniagaan kewangan Islam. Apabila
soalan berkaitan perkara Shariah berbangkit dalam mana-mana
prosiding berkaitan perniagaan kewangan Islam, dicadangkan bahawa D
mahkamah mengekalkan pilihan untuk merujuk soalan sedemikian
kepada SAC untuk pendapatnya. Tambahan kepada pendapat SAC,
pihak-pihak bebas mengemukakan keterangan pakar untuk menyokong
atau menyanggah pendapat tersebut. Mahkamah perlu
mempertimbangkan pendapat SAC dan kesemua keterangan pakar yang E
dikemukakan dalam membuat pertimbangan. Dalam berbuat demikian,
berat yang persuasif wajar diberi pada pendapat SAC,
mempertimbangkan peranannya sebagai ‘pakar statutori’. Selepas
menilai kesemua keterangan, mahkamah bebas untuk tidak menyetujui
pendapat SAC, dengan memberi pendapat untuk berbuat demikian.
F
(8) Seksyen-Seksyen 56 dan 57, oleh itu, melanggar doktrin pemisahan
kuasa di mana seksyen-seksyen tersebut memberi kuasa kehakiman
kepada SAC, sebuah badan bukan kehakiman bawah PP.
Oleh Richard Malanjum KH (menentang):
G
(1) Alasan penting untuk pengasingan kuasa-kuasa Kerajaan dalam tiga
cabang adalah untuk memastikan mekanisme wajar sekat dan imbang,
untuk mengelak Kerajaan yang kejam atau arbitrari. Adalah salah
anggapan untuk mencadangkan ‘kelenturan’ doktrin pengasingan kuasa
membenarkan ‘pertindihan dan percampuran’ fungsi-fungsi antara
cabang-cabang Kerajaan, agar setiap satu boleh melaksanakan kuasa yang H
lain. Cadangan sedemikian tidak mengendahkan pengasingan kuasa
kehakiman asas daripada kuasa Perundangan dan Eksekutif. Ini akan
menjadikan doktrin pengasingan kuasa diperolok-olokkan jika Parlimen
dibenarkan untuk menugaskan kuasa Perundangan kepada Kehakiman.
I
(2) Perletakan hak kuasa kehakiman pada Kehakiman terjalin erat dengan
prinsip yang mendasari kedaulatan undang-undang. Pada peringkat asas,
kedaulatan undang-undang memerlukan undang-undang yang boleh
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 587
National Society for the Prevention of Cruelty to Animals v. Minister of Justice and A
Constitutional Development 2016 1 SACR 308 (SCA) (refd)
Ong Ah Chuan v. PP [1981] AC 648 (refd)
Palling v. Corfield [1970] 123 CLR 52 (refd)
Palmer v. Ayers [2017] 341 ALR 18 (refd)
Pengarah Tanah dan Galian, Wilayah Persekutuan v. Sri Lempah Enterprise Sdn Bhd
[1978] 1 LNS 143 FC (refd) B
Pioneer Concrete (Vic) Pty Ltd v. Trade Practices Commission [1982] 43 ALR 449 (refd)
PP v. Dato’ Yap Peng [1987] 1 CLJ 550; [1987] CLJ (Rep) 284 SC (refd)
PP v. Dato’ Yap Peng [1987] 1 LNS 28 HC (refd)
PP v. Kok Wah Kuan [2007] 6 CLJ 341 FC (refd)
PP v. Lau Kee Hoo [1983] 1 CLJ 21; [1983] CLJ (Rep) 336 FC (refd)
C
Prentis v. Atlantic Coast Line Co 211 US 210 (1908) (refd)
Queen Victoria Memorial Hospital v. Thornton [1953] 87 CLR 144 (refd)
R v. Coates [2004] 1 WLR 3043 (refd)
R v. Davison [1954] ALR 877 (refd)
R v. Kirby; ex p Boilermakers’ Society of Australia [1956] ALR 163 (refd)
R v. Local Government Board (1902) 2 IR 349 (refd) D
R v. Trade Practices Tribunal, ex p Tasmanian Breweries Pty Ltd [1970] ALR 49 (refd)
R v. Young (Trevor) [2004] 1 WLR 1587 (refd)
R (Anderson) v. Secretary of State for the Home Department [2003] 1 AC 837 (refd)
R (on the application of Anderson) v. Secretary of State for the Home Department
[2002] UKHL 46 (dist)
Re Dato Bentara Luar Decd Hj Yahya Yusof & Anor v. Hassan Othman & Anor E
[1982] 1 LNS 16 FC (refd)
Re Tracey; ex parte Ryan [1989] 84 ALR 1 (refd)
Reg v. Davison [1954] 90 CLR 353 (refd)
Reserve Bank of India v. Peerless General Finance and Investment Co Ltd And Others
[1987] 1 SCC 424 (refd)
Rizeq v. Western Australia [2017] HCA 23 (refd) F
Rola Company (Australia) Pty Ltd v. Commonwealth [1944] 69 CLR 185 (refd)
S v. Dodo 2001 SACR 594 (CC) (refd)
Semenyih Jaya Sdn Bhd v. Pentadbir Tanah Daerah Hulu Langat & Another Case
[2017] 5 CLJ 526 FC (dist)
Shell Co of Australia v. Federal Commissioner of Taxation [1931] AC 275 (refd)
Springer v. Philippine Islands 277 US 128 (1927) (refd) G
State (O’Rourke) v. Kelly [1983] IR 38 (refd)
State of Gujarat Revenue Tribunal Bar Association [2012] 10 SCC 353 (refd)
Sulaiman Takrib v. Kerajaan Negeri Terengganu; Kerajaan Malaysia (Intervener) & Other
Cases [2009] 2 CLJ 54 FC (refd)
Tan Eng Hong v. Attorney-General [2012] 4 SLR 476 (refd)
Tan Sri Abdul Khalid Ibrahim v. Bank Islam Bhd & Another Case [2010] 4 CLJ 388 H
HC (refd)
Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd [2012] 3 CLJ 249 HC (refd)
Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd [2013] 4 CLJ 794 CA (refd)
Tan Sri Khoo Teck Puat & Anor v. Plenitude Holdings Sdn Bhd [1995] 1 CLJ 15 FC
(refd)
I
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 591
Richard Bellamy, The Rule of Law and the Separation of Powers, 2017, London: A
Routledge, 2016, p 261
Sir Owen Dixon, The Law and the Constitution, 1935, 51 Law Quarterly Review 590,
p 606
Sir William Blackstone, Commentaries, vol 1, 1765/1979, pp 259-260
For the appellant - Malik Imtiaz Sarwar, Pradeep Nandrajog, Chan Wei June, Dinesh B
Nandrajog, Clinton Tan Kian Seng & Aliff Benjamin; M/s Nandrajog
For the respondent - Yoong Sin Min, Samuel Tan Lih Yau & Sanjiv Naddan; M/s Shook
Lin & Bok
For the 1st intervener - Mohd Johan Lee & Muhamad Nakhaie Ishak; M/s J Lee & Assocs
For the 2nd intervener - Cyrus Das, Abdul Rashid Ismail & Siti Nurani Zahidi;
M/s Rashid Zulkifli C
Reported by S Barathi
JUDGMENT
Mohd Zawawi Salleh FCJ (majority): D
Introduction
[1] This matter came before this court by way of a constitutional reference
by the High Court at Kuala Lumpur pursuant to s. 84 of the Courts of
Judicature Act 1964 (“Act 91”) and art. 128(2) of the Federal Constitution E
(“FC”).
[2] The constitutional questions reserved for determination by this court
are as follows:
(1) Whether Sections 56 and 57 of the Central Bank of Malaysia Act 2009
F
are in breach of the Federal Constitution and unconstitutional by reason
of:
(a) Contravening Article 74 of the Federal Constitution read together
with the Ninth Schedule of the Federal Constitution for the Shariah
Advisory Council (“SAC”) having been vested with the power to
ascertain Islamic law; G
A The Parties
[4] The applicant, JRI Resources Sdn Bhd, is a company incorporated in
Malaysia with its address at No. 46-A, Jalan Ara Satu, Taman Rinting,
81750 Masai, Johor Darul Takzim, and was at all material times a customer
of the respondent. The applicant is the first defendant in the proceedings
B
before the High Court.
[5] The respondent is a financial institution incorporated in Malaysia and
has its registered address at Level 26, Menara Prestige, No. 1, Jalan Pinang,
50450 Kuala Lumpur and had granted various Islamic facilities, including an
Ijarah facility, to the applicant. The respondent is the plaintiff in the
C
proceedings before the High Court.
[6] The first intervener is the President of Persatuan Institusi Perbankan
Islam Malaysia (“Association of Islamic Banking Institutions Malaysia”
(“AIBIM”)), a body stated to have been established in 1996. It was formerly
D known as the Association of Interest Free Banking Institutions Malaysia with
the objective, inter alia, of promoting the establishment of sound Islamic
banking systems and practices and also of promoting and representing the
interest of members and rendering where possible such advice or assistance
as may be deemed necessary and expedient to members. One of the supports
provided by AIBIM is through the establishment of a special task force
E
committee known as AIBIM-ISRA Shariah Standard Formulation Task
Force to assist Bank Negara Malaysia (“BNM”) and International Shariah
Research Academy for Islamic Finance (ISRA) in drafting the standards for
Shariah contracts.
F [7] The second intervener, BNM, was established pursuant to s. 3 of the
Central Bank of Malaysia Act 1958 (“the 1958 Act”). The 1958 Act was
repealed and replaced by the Central Bank of Malaysia Act 2009 (“the 2009
Act”). The principal object of BNM is “to promote monetary stability and
financial stability to the sustainable growth of the Malaysia economy”
(see s. 5(1) of the 2009 Act). The primary functions of BNM include to
G
regulate and supervise financial institutions which are subject to the laws
enforced by BNM (see s. 5(2) and (1) of the 2009 Act) and to promote a
sound, progressive and inclusive financial system (s. 5(2)(f)). Section 5(4)
further provides that BNM “shall have regard to the national interest” in
carrying out its functions under the 2009 Act. The Islamic banking industry
H is included under the purview of BNM as s. 27 of the 2009 Act recognises
Islamic financial system as part of the Malaysian financial system besides the
conventional financial system.
The Factual Background And Antecedent Proceedings
I [8] The genesis of the dispute giving rise to this reference proceedings can
be traced back to four Ijarah Muntahiah Bitamlik Facilities (“the Ijarah
facilities”) and a Murabahah Tawarruq Contract Financing facility
(“the MTQ Facility”) entered between the applicant and the respondent
594 Current Law Journal [2019] 5 CLJ
A [17] Both the applicant and the respondent actively participated in the
process before the SAC. The applicant on or about 15 February 2016,
submitted an expert opinion to the SAC and the respondent also submitted
its expert opinion to the SAC. The opinions were in conflict. The applicant’s
expert, Dr Azman Mohd Noor, disagreed with the inclusion of cl. 2.8 in the
B Ijarah facilities agreements as he was of the view that it did not comply with
Islamic law. On the contrary, the respondent’s expert, Dr Azman Hasan,
took the position that non-compliance was not material and therefore did not
invalidate the Ijarah facilities.
[18] On 30 June 2016, the SAC forwarded its ruling to the High Court on
C the Shariah principles that it had ascertained (see Shariah Advisory Council’s
Ruling dated 30 June 2016 pp. 299 to 301 of AR vol. 2). The English
translation of the said ruling is set out below:
Court’s Reference To Bank Negara Malaysia’s Shariah Advisory Council
(Civil Suit No. 33 NCVC-584-09/2013)
D
Kuwait Finance House (Malaysia) Berhad Vs JRI Resources Sdn Bhd,
Ismail Bin Kamin, Zulhizzan Bin Ishak & Muhamad Norazam Bin Ramli
Introduction
In answering to the question posed by the court, the SAC took note that
E the SAC’s duty is merely to analyse the Syariah’s issues that are
contained in each question posed and to state the Hukum Syarak ruling
relating to the question. The SAC does not have jurisdiction to make a
finding of facts or to apply the ruling to the facts of the case and to decide
whether relating to an issue or for the case because this jurisdiction is
vested with the court.
F
Referred Question
Whether clause 2.8 in all Ijarah Agreements (4 in total) between the
Plaintiff and its customer (the 1st Defendant) is Shariah compliant, in the
light of the Shariah Advisory Council resolution made during its 29th
meeting on 25.9.2002, the 36th meeting dated 26.6.2003 and the 104th
G meeting dated 26.8.2010.
…
Answer
After referring to the decision of the SAC’s earlier meeting, concerning
H the issue of the cost of maintenance of ijarah’s asset, the SAC has
decided that in principle, the maintenance cost relating to the ownership
of ijarah’s asset is the responsibility of the owner, meanwhile the cost
relating to the usufruct of the rental is the responsibility of the lessee.
Nevertheless, there are few arrangements that were allowed by the SAC
which are:
I
(i) The owner of the asset can delegate to the lessee to bear the
maintenance cost of the asset and amount of that cost will be fully
deducted in the transaction’s sale and purchase of the asset at the
end of the lease period; or
596 Current Law Journal [2019] 5 CLJ
(ii) The owner and the lessee may negotiate and agree to decide which A
party that will bear the maintenance cost of the asset.
Accordingly, the SAC has decided that the negotiation to determine the
party that will bear the maintenance cost of the asset is allowed, as long
as it has been agreed by the contracting parties.
[19] Following the ruling from the SAC, the High Court scheduled a B
hearing date in August/September 2016 for the trial to proceed on the
respondent’s claim against the applicant.
[20] However, before the trial could proceed, the applicant filed an
application for a reference to the Federal Court pursuant to art. 128(2) of the
C
FC and s. 84 of the Courts of Judicature Act 1964 (Act 91) to determine if
ss. 56 and 57 of the 2009 Act under which the SAC gave its ruling was
constitutionally valid. In short, the applicant declined to accept the ruling
issued by the SAC.
[21] The High Court, on 22 August 2016, dismissed the applicant’s D
application for a constitutional reference. The applicant then filed an appeal
to the Court of Appeal against the said dismissal.
[22] On 15 May 2017, the Court of Appeal allowed the applicant’s appeal
and ordered the High Court to make the constitutional reference as sought
by the applicant. E
[23] Accordingly, on 20 October 2017, the High Court made the reference
to the Federal Court. Hence, these reference proceedings before us.
[24] On 15 March 2018, this court allowed AIBIM and BNM to intervene
and participate in the reference proceedings. F
[25] Before we proceed further, we wish to express our appreciation to all
counsel concerned for their lucid, thorough and helpful submissions.
The Applicant’s Submissions
Reference Question 1(a)
G
[26] At the outset of the hearing of these reference proceedings, learned
counsel for the applicant informed the court that he did not wish to pursue
question 1(a). The applicant accepted that item 4(k) of List I (Federal List)
in the Ninth Schedule to the FC vests legislative competence in Parliament
to enact laws aimed at ascertaining Islamic law and other personal laws for H
purposes of federal law.
[27] In our considered view, learned counsel’s concession on this issue was
rightly made in law. Article 74 of the FC enjoins the Federal and State
Legislatures in enacting legislation to observe the allocation of legislative
power over the matters enumerated in the Ninth Schedule under the I
respective lists. Article 74 of the FC reads:
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 597
A [34] Learned counsel sought to impress upon us that the law making power
of Parliament is bound by the concept of constitutional limitation. Where a
law is enacted for purposes not sanctioned by the Constitution, it must be
held to be unconstitutional and void. The Constitution is suprema lex, the
supreme law of the land (see art. 4 of the FC) and there is no organ of
B Government above or beyond it. Every organ of the Government, be it the
Executive, the Legislature or the Judiciary, derives its authority from the
Constitution and it has to act within the limits of the authority. If there is
a transgression of the constitutional limitation, the law made by the
Legislature has to be declared ultra vires by the court.
C [35] We find it convenient to deal with this issue together with question
no. 1(b) since both issues are clearly related and the arguments presented by
learned counsel for the applicant are overlapping and intertwined.
Reference Question 1(b)
D [36] The issue that forms the axis of the dispute between the parties in this
reference proceedings is whether ss. 56 and 57 of the 2009 Act are
unconstitutional as they contravene Part IX of the FC (art. 121) on the
judicial power, and that “the said sections have the effect of vesting judicial
power in the SAC”.
E [37] In regard to question 1(b), learned counsel for the applicant in his
submission has two strings to his bow. First, learned counsel argued that the
doctrines of separation of powers and independence of the Judiciary are basic
features of the FC and are an integral part of its basic structure. It is an
essential feature of the Judiciary that it be seised with all the powers
F necessary to comprehensively determine any matters that come before the
courts. This is an essential feature of the court and necessarily arises from
the language of art. 121(1)-(1B) and (2) of the FC. In support of his
submission, emphatic reliance was placed on the decision of the celebrated
case of Semenyih Jaya Sdn Bhd v. Pentadbir Tanah Daerah Hulu Langat &
Another Case [2017] 5 CLJ 526; [2017] 3 MLJ 561 (“Semenyih Jaya case”)
G
wherein this court, inter alia, held that the Judicial power resides solely in
the Judiciary and no other as is explicit in art. 121(1) of the FC. In the
superior courts, only judges appointed under art. 121(1) of the FC, and no
other, could exercise decision-making powers. The discharge of judicial
power by non-qualified persons (not being judges or judicial officers) or
H non-judicial personages renders the said exercise ultra vires art. 121(1) of the
FC.
[38] Another string to his bow is that the power to adjudicate in civil and
criminal matters is exclusively vested in the courts. For this purpose, judicial
power is to be understood as the power to examine questions submitted for
I
determination with a view to the pronouncement of an authoritative decision
as to the right and liabilities of one or more parties. To that end, judicial
600 Current Law Journal [2019] 5 CLJ
power cannot be removed from the civil courts. The jurisdiction of the High A
Courts cannot be truncated or infringed. Reliance was placed on the case of
Indira Gandhi Mutho v. Pengarah Jabatan Agama Islam Perak & Ors and Other
Appeals [2018] 3 CLJ 145; [2018] 1 MLJ 545 wherein the Federal Court, inter
alia, held that:
[45] The significance of the exclusive vesting of judicial power in the B
Judiciary, and the vital role of judicial review in the basic structure of the
constitution, is twofold. First, judicial power cannot be removed from the
civil courts. The jurisdiction of the High Courts cannot be truncated or
infringed. Therefore, even if an administrative decision is declared to be
final by a governing statute, an aggrieved party is not barred from
C
resorting to the supervisory jurisdiction of the court. The existence of a
finality clause merely bars an appeal to be filed by an aggrieved party.
[39] The essence of learned counsel’s submission is that it is impermissible
for the Legislature to abrogate or vest judicial functions, specially the
functions traditionally vested in the High Court, and to confer or vest the
D
same in another person or body, which is devoid of essentials of a superior
court. In other words, the ascertainment of existing rights by judicial
determination of issues of fact or law falls exclusively within judicial power
and Parliament cannot confer the function on any other person or body but
a court constituted under art. 121(1) of the FC. Judicial power requires a
court to exercise its independent judgment in interpreting and expounding E
upon the law. Ascertainment of Islamic law for banking by the SAC would
preclude a judge from exercising its independent judgment. It is emphatically
the province and duty of the court to say what the law is and no one, not
even Parliament, can transfer this power from the Judiciary to another body.
F
[40] Learned counsel for the applicant then invited our attention to the
functions of SAC as stated in s. 52 of the 2009 Act:
Functions of Shariah Advisory Council
52. (1) The Shariah Advisory Council shall have the following functions:
G
(a) to ascertain the Islamic law on any financial matter and issue a
ruling upon reference made to it in accordance with this Part;
(b) to advise the Bank on any Shariah issue relating to Islamic financial
business, the activities or transactions of the Bank;
(c) to provide advice to any Islamic financial institution or any other H
person as may be provided under any written law; and
(d) such other functions as may be determined by the Bank.
(2) For the purposes of this Part, “ruling” means any ruling made by the
Shariah Advisory Council for the ascertainment of Islamic law for the
purposes of Islamic financial business. I
(emphasis added).
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 601
A [41] Learned counsel posited that reading s. 52 together with ss. 56 and 57
of the 2009 Act, it is self-evident that the SAC has been given a role in legal
proceedings relating to Islamic financial business. Learned counsel
vehemently submitted that by virtue of ss. 56 and 57 of the 2009 Act, the
SAC’s role goes beyond the function of ascertaining Islamic law on any
B question of Shariah that arises in dispute before a High Court.
[42] Whilst canvassing the above contention, learned counsel for the
applicant pointed out that in the event a reference is made by a court or
arbitrator concerning Shariah question(s), it would require the SAC to
determine the appropriate legal principles to be applied to the transaction
C concerned. This would necessarily involve a consideration of the nature of
the transaction and the agreement(s) entered into for that purpose. Other facts
might also be relevant, for instance, the method employed to bind the parties
to the transaction for the purpose of the said transaction. The SAC then has
to apply the appropriate legal principles to the material facts so as to enable
D a ruling to be issued on the question(s) referred.
[43] It was the contention of learned counsel that the steps described above
are not merely an exercise directed at ascertainment of Islamic law, such as
is contemplated by item 4(k), List I (Federal List) in the Ninth Schedule to
the FC but in fact an exercise of a judicial function. Moreover, the ruling
E issued by the SAC is binding on the High Court.
[44] Learned counsel further submitted that the ruling(s) of the SAC is to
all intent and purposes an opinion. The courts have characterised the SAC
for this purpose as a “statutory expert”, citing observation made by the
learned judge in Mohd Alias Ibrahim v. RHB Bank & Anor [2011] 4 CLJ 654,
F
at para. [109]:
Hence, the ruling issued by the SAC is an expert opinion in respect of
Islamic finance matters and it derives its binding legal effect from the
Impugned Provisions enacted pursuant to the jurisdiction provided under
the Federal Constitution.
G
[45] Learned counsel contended that this in itself is not controversial. This
court had declared in Sulaiman Takrib v. Kerajaan Negeri Terengganu; Kerajaan
Malaysia (Intervener) & Other Cases [2009] 2 CLJ 54; [2009] 6 MLJ 354 (FC),
per Zaki Azmi PCA (as he then was) at para. [105]:
H This court is not an expert in Islamic law. It therefore has to rely on
opinions given by experts in this field.
[46] According to learned counsel, the difficulty created by ss. 56 and 57
of the 2009 Act is that these provisions, firstly, remove the discretion of the
High Court as to the need for expert evidence on the subject, and secondly,
I make the “expert opinion” of the SAC binding. It is settled that it is for the
trial court to determine whether to accept expert evidence and, in the face
602 Current Law Journal [2019] 5 CLJ
[49] Both facets of the arguments advanced by learned counsel for the
applicant had been seriously opposed by learned counsel for the respondent
and interveners. We will refer to their submissions in the course of our
deliberation.
F
Legislative History Of The SAC
[50] Before we dwell on the legal issues raised by learned counsel for the
applicant, perhaps it would be useful to narrate the legislative history and
genesis of the SAC.
[51] It is necessary to find out what were the concerns of Parliament, based G
on the legislative history of the SAC, when it introduced the new ss. 56 and
57 into the 2009 Act.
[52] The best way to understand a law is to know the reason for it. In
Utkal Contractors and Joinery Pvt Ltd And Others v. State of Orissa And Others
H
[1987] 3 SCC 279, Justice Chinnappa Reddy of the Indian Supreme Court,
said:
9. ... A statute is best understood if we know the reason for it. The reason
for a statute is the safest guide to its interpretation. The words of a
statute take their colour from the reason for it. How do we discover the
I
reason for a statute? There are external and internal aids.
The external aids are Statement of Objects and Reasons when the Bill is
presented to Parliament, the reports of Committees which preceded the
Bill and the reports of Parliamentary Committees. Occasional excursions
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 603
A into the debates of Parliament are permitted. Internal aids are the
preamble, the scheme and the provisions of the Act. Having discovered
the reason for the statute and so having set the sail to the wind, the
interpreter may proceed ahead…” (emphasis added).
[53] Again in Reserve Bank of India v. Peerless General Finance and Investment
B Co Ltd And Others [1987] 1 SCC 424, Justice Reddy said:
33. Interpretation must depend on the text and the context. They are the
bases of interpretation. One may well say if the text is the texture, context
is what gives the colour. Neither can be ignored. Both are important. That
interpretation is best which makes the textual interpretation match the
C contextual. A statute is best interpreted when we know why it was
enacted. With this knowledge, the statute must be read, first as a whole
and then section by section, clause by clause, phrase by phrase and word
by word. If a statute is looked at, in the context of its enactment, with the glasses
of the statute maker, provided by such context its scheme, the sections, clauses, phrases
and words may take colour and appear different than when the statute is looked at
D without the glasses provided by the context. With these glasses the court must
look at the Act as a whole and discover what each section, each clause,
each phrase and each word is meant and designed to say as to fit into
the scheme of the entire Act. No part of a statute and no word of a
statute can be construed in isolation. Statutes have to be construed so
that every word has a place and everything is in its place. (emphasis
E added).
[54] To provide context, we first give an overview of the unique
characteristics of Islamic banking. One of the unique characteristics of
Islamic banking and finance is compliance with Shariah principles and
rulings. Shariah compliance is what distinguishes an Islamic bank from a
F conventional bank as the former observes certain rules and prohibitions not
observed by the latter. Failing to fulfil Shariah compliance requirements
would generate a risk called “the Shariah non-compliance risk”. This risk is
unique to the Islamic banking and finance industry, and is particularly
significant to it for the following reasons:
G
(i) it generally impacts the industry’s reputation as well as the reputation
of the financial institutions and thus, it may deteriorate reliance by
depositors, investors, customers and stakeholders in the long term;
(ii) contracts containing Shariah repugnant elements which had already been
H executed are liable to be deemed null and void, which would in turn
render the profits derived thereof non-halal. As a result the tainted
income arising from such transactions must be channelled to charity and
cannot be kept by the bank; and
(iii) it may involve some legal costs as potential suits may lead to payment
I of damages.
604 Current Law Journal [2019] 5 CLJ
[60] The Central Bank of Malaysia Act 1958 (“the 1958 Act”) was then
amended by the addition of s. 16B which came into force on 1 January 2004.
[61] The old s. 16B of the 1958 Act expressly stated that where in any
proceedings relating to Islamic banking business and Islamic financial I
business which is based on Shariah principles before any court or arbitrator
any question arises concerning a Shariah matter, the court or the arbitrator
may refer such question to the SAC for its ruling. Any ruling made by the
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 605
[67] In Malayan Banking Bhd v. Ya’kup Oje & Anor [2007] 1 LNS 451; [2007] A
6 MLJ 389, it was observed by the High Court at para. 28 that it could on
its own have recourse to the various sources of Islamic law to determine the
appropriate Shariah principle to apply on the ‘riba’ issue. The court perforce
made reference to the judgment of the Supreme Court of Pakistan on the
subject and reminded itself of the presence of various forms of legal B
stratagems called ‘helah’ to disguise the imposition of interest in Islamic
facilities, and other-like propositions.
[68] The approaches taken by the courts had also opened the way for
Islamic banking cases to be decided based on the civil and common law. In
this situation, the underlying transaction, which strictly must comply with C
the Shariah principles lost its essence. Since Shariah compliance of all
business activities is a pivotal requirement in the Islamic banking and
financial system, it is senseless for the parties to enter into a transaction
which is not only governed by civil and common law but also decided even
against the Shariah principles. D
[69] In Arab-Malaysian Finance Bhd v. Taman Ihsan Jaya Sdn Bhd (supra),
Abdul Wahab Patail J (as he then was) caused great concern, disquiet and
uneasiness among Islamic banks and lawyers when he ruled that the bai’
bithaman ajil (“BBA”) contract in the cases before him was not a bona fide
sale but a financing transaction. His Lordship found that the profit portion E
rendered the transaction contrary to the Islamic Banking Act 1983 on the
ground that it made the contract far more onerous than the conventional
banking with riba. In reaching his decision, His Lordship held that the civil
court was not a mere rubber stamp and that its function was to examine the
application of the Islamic concepts and to ensure that the transactions did not F
involve any element not approved in Islam. The learned judge further stated
that ‘whether the court is a Syariah Court or not, that Allah is Omniscient
must also be assumed where that court is required, in this case by law, to
take cognisance of elements in the religion of Islam.’ In emphasising that
form could not override substance, even the website of the Bank Negara G
Malaysia on BBA Financing was not spared his scalpel. The learned judge
went so far as to hold the words ‘not approved by the religion of Islam’ in
the Islamic Banking Act 1983 meant that ‘unless the financing facility is
plainly stated to be offered as specific to a particular mazhab, then the fact
it is offered generally to all Muslims means that it must not contain any
H
element not approved by any of the recognised mazhabs’.
[70] On appeal, the aforesaid decision of Taman Ihsan was reversed
(See in Bank Islam Malaysia Bhd v. Lim Kok Hoe & Anor And Other Appeals
[2009] 6 CLJ 22; [2009] 6 MLJ 839 (CA) at 851, 853-855). In doing so, the
Court of Appeal held that the BBA facility agreement was valid and I
enforceable.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 607
A [71] The Court of Appeal further held that Islamic financing facilities do
not have to satisfy all four mazhabs to be considered acceptable in the
religion of Islam. On this, the Court of Appeal held at p. 37 (CLJ); p. 853
(MLJ):
With utmost respect, the learned judge had misinterpreted the meaning
B of ‘do not involve any element which is not approved by the religion of
Islam’. First, under s. 2 of the Islamic Banking Act 1983, ‘Islamic banking
business’ does not mean banking business whose aims and operations are
approved by all the four mazhabs. Secondly, we do not think the religion
of Islam is confined to the four mazhabs alone as the sources of Islamic
law are not limited to the opinions of the four imams and the schools of
C
jurisprudence named after them. As we all know, Islamic law is derived
from the primary sources i.e. the Holy Quran and the Hadith and
secondary sources. There are other secondary sources of Islamic law in
addition to the jurisprudence of the four mazhabs.
[72] The Court of Appeal stressed the fact that civil court judges should not
D decide whether a matter is in accordance with the religion of Islam or not.
The Court of Appeal held:
[32] In this respect, it is our view that judges in civil court should not
take upon themselves to declare whether a matter is in accordance to the
religion of Islam or otherwise. As rightly pointed out by Suriyadi J (as
E he then was) in Arab-Malaysian Merchant Bank Bhd v. Silver Concept Sdn Bhd
[2005] 5 MLJ 210 that in the civil court ‘not every presiding judge is a
Muslim, and even if so, may not be sufficiently equipped to deal with
matters, which ulama’ take years to comprehend’. Thus, whether the bank
business is in accordance with the religion of Islam, it needs consideration by eminent
jurists who are properly qualified in the field of Islamic jurisprudence. (emphasis
F added).
[73] It could be said that the new ss. 56 and 57 of the 2009 Act had solved
this issue by making it compulsory for the civil court judges to refer the
matter to the SAC or to refer to the SAC’s ruling.
G [74] Section 56 of the 2009 Act provides:
(1) Where in any proceedings relating to Islamic financial business before
any court or arbitrator any question arises concerning a Shariah matter,
the court or the arbitrator, as the case may be, shall:
(a) take into consideration any published rulings of the Shariah
H Advisory Council; or
(b) refer such question to the Shariah Advisory Council for its ruling.
(2) Any request for advice or a ruling of the Shariah Advisory Council
under this Act or any other law shall be submitted to the secretariat.
(emphasis added).
I
[75] “Islamic financial business” is defined in s. 2 of the 2009 Act to mean:
any financial business in ringgit or other currency which is subject to the
laws enforced by the Bank and consistent with the Shariah.
608 Current Law Journal [2019] 5 CLJ
[78] The 2009 Act further affirms the legal status of Shariah
pronouncements issued by the SAC as binding upon both the courts as well
as arbitrators. The court or an arbitrator is required to refer to the SAC for
deliberation on any Shariah issue as well as take into account its existing
Shariah rulings. Undeniably, legal certainty is upheld by the 2009 Act E
through legal recognition of the SAC as the reference point for courts and
arbitrators on any Shariah matter in relation to Islamic finance business. This
is crucial to promote consistent implementation of Shariah contractual
principles in Islamic financial transactions.
F
(See generally Tun Abdul Hamid Mohamed and Dr Adnan Trakic,
“The Shariah Advisory Council’s Role in Resolving Islamic Banking Disputes in
Malaysia: A Mode to Follow?” (International Shariah Research Academy for
Islamic Finance (ISRA) Research Paper (No.47, 2012)).
[79] In the course of their arguments, learned counsel for the respondent G
and the interveners attached considerable weight to the need for certainty
around the Shariah law applicable to Islamic banking and finance. According
to them, uncertainty of Shariah interpretation would be disruptive for the
Islamic market to function well. Hence, s. 51 of the 2009 Act provides for
the establishment of the SAC to serve the particular need for an authoritative
H
view on Shariah matters in Islamic finance.
[80] We agree with the submissions. In this aspect, it is relevant to
reproduce the passage in the judgment of Rohana Yusuf J (now FCJ) in
Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd & Another Case [2010]
4 CLJ 388 at para. [18]: I
[18] To my mind there is good reason for having this body. A ruling made
by a body given legislative authority will provide certainty, which is a much
needed element to ensure business efficacy in a commercial transaction.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 609
A [99] It is, therefore, clear that the doctrine of separation of powers is not
rigid, fixed or static but continues to evolve. The traditional notion that there
are separate and distinct roles for the executive, legislative, and judicial
branches of Government which should remain inviolate has changed over
time to reflect their growing interrelationship to facilitate the efficient
B operation of Government.
[100] In Malaysia today there are several statutory adjudicatory bodies that
have decision-making powers in disputes between parties like the Special
Commissioners of Income Tax or the Labour Tribunals under the
Employment Act 1955, the Industrial Court established under s. 21 of the
C Industrial Relations Act 1967, the Customs Appeal Tribunal (CAT)
established under the Customs Act 1967 or the Competition Appeal Tribunal
established under s. 44 of the Competition Act 2010. They are adorned with
similar trappings as a court but are not strictly “courts” within the meaning
of art. 121 of the FC.
D
[101] In Shell Co of Australia v. Federal Commissioner of Taxation [1931] AC
275, cited by learned counsel for the second intervener in his argument, a
similar point was considered by the Privy Council on the issue whether the
Board of Review of Taxation in Australia was a body exercising judicial
power of the state. The Privy Council observed thus:
E
The authorities are clear to show that there are tribunals with many of
the trappings of a court which, nevertheless, are not courts in the strict
sense of exercising judicial power.
[102] The Privy Council further focused on certain characteristic features of
a court: a tribunal will not become a court merely because it gives a final
F
decision, examines witnesses on oath, contending party is heard, decisions
affecting rights of subjects are rendered by it, or decision is appealable to
ordinary courts. Even whilst acting judicially, a tribunal may retain its
characteristics as an administrative body as distinguished from a court.
Applying the aforesaid tests, the Privy Council ruled that the board of review
G established under the Income Tax Act 1922-25 of Australia was not a court
but only an administrative tribunal empowered by law to review decisions
of the Commissioner of Income Tax who was not a judicial authority. The
Privy Council goes on to say “an administrative tribunal may act judicially
but still remain an administrative tribunal as distinguished from a court,
H strictly so called. Mere externals do not make a direction … by an ad hoc
tribunal an exercise by a court of judicial power” (at p. 508) (see also
Associated Cement Co Ltd v. PN Sharma AIR 1965 SC 1595; Durga Shankar
Mehta v. Raghuraj Singh AIR 1954 SC 520, Kihoto Hollohon v. Sri Zachillhu
AIR 1950 SC 188, Virindar Kumar Satyawadi v. The State of Punjab AIR 1956
I SC 153; State of Gujarat Revenue Tribunal Bar Association [2012] 10 SCC 353).
614 Current Law Journal [2019] 5 CLJ
Judicial Power A
A [106] Learned counsel for the first intervener submitted that similar
definition has been adopted in Malaysia in case of PP v. Dato’ Yap Peng [1987]
1 CLJ 550; [1987] CLJ (Rep) 284. It was further expounded in Semenyih Jaya
case. This court highlighted in the latter case that the exercise of judicial
power carries two features. The first feature is that judicial power is exercised
B in accordance with the judicial process of the judicature which is also
illustrated by Gaudron J in Wilson v. Minister for Aboriginal Affairs [1996] 189
CLR 1 at 562 when he said:
For the moment, it is sufficient to note that the effective resolution of
controversies which call for the exercise of the judicial power of the
C Commonwealth depends on public confidence in the courts in which that
power is vested. And public confidence depends on two things. It
depends on the courts acting in accordance with the judicial process.
More precisely, it depends on their acting openly, impartially and in
accordance with fair and proper procedures for the purpose of determining the matter
in issue by ascertaining the facts and the law and applying the law as it is to the
D facts as they are. And, just as importantly, it depends on the reputation of
the courts for acting in accordance with that process.
So critical is the judicial process to the exercise of judicial power that it
forms part of the definition of that power. Thus, judicial power is not
simply a power to settle justiciable controversies, but a power which must
E be and must be seen to be exercised in accordance with the judicial
process. (emphasis added).
[107] The second feature of judicial power as explained by Her Ladyship
Zainun Ali FCJ is vested only in persons appointed to hold judicial office.
Therefore, a non-judicial personage has no right to exercise judicial power.
F As observed by Lord Diplock in Hinds v. The Queen [1977] AC 195:
What, however is implicit in the very structure of a Constitution on the
Westminster model is that judicial power, however it be distributed from
time to time between various courts, is to continue to be vested in persons
appointed to hold judicial office in the manner and on the terms laid
down in the Chapter dealing with the judicature, even though this is not
G
expressly stated in the Constitution. (emphasis added).
[108] We have no reservations in accepting the proposition of law
expounded in the Semenyih Jaya case. In our considered opinion, the SAC
does not have any characteristics of judicial power as laid down in the
H Semenyih Jaya case. The ruling made by the SAC is solely confined to the
Shariah issue. The presiding judge who made reference to the SAC will then
exercise his judicial power and decide the case based on the evidence
submitted before the court. Since there is no judicial power vested in the
SAC, the SAC does not usurp the judicial power of the court.
I [109] We accept the contention advanced by learned counsel for the
first intervener that s. 56(1) of the 2009 Act gives option to the court or
arbitrator whether to take into consideration the published ruling of the SAC
or refer the Shariah issue to the SAC for ruling. The word “or” in that section
616 Current Law Journal [2019] 5 CLJ
signifies that such option is provided to the court or arbitrator. The phrase A
“take into consideration” in that section implies that only the court or
arbitrator has the exclusive judicial power to decide on the case by applying
the ruling of the SAC to the facts of the case before them.
[110] Learned counsel for the applicant submitted, citing the Australian case
B
of Mellifont v. Attorney-General for State of Queensland [1991] 173 CLR 289,
that in order to determine whether a power concerned was judicial power;
it was important to consider whether the exercise of such power is “an
integral part of the process of determining the rights and obligations of the
parties which are at stake in the proceedings”.
C
[111] With respect, the submission is without substance for the simple
reason that the High Court of Australia in Mellifont had recognised that it is
the combination of attributes that make an exercise of judicial power.
It should also be noted that Mellifont is a criminal case and any matter
relating to criminal liability vests exclusively with court. Likewise, the case
D
of R (on the application of Anderson) v. Secretary of State for the Home Department
[2002] UKHL 46 referred to by learned counsel for the applicant, concerns
a dispute in a criminal case, where the court recognised that jurisdiction over
disputes in criminal matters lie only with the court.
[112] The Australian High Court itself recognises in the judgment that it is
E
the combination of the attributes that makes it the exercise of judicial power
and not any single one or other of them. At p. 106 of the law report the
following observation is made:
Leaving aside these incidental powers with an administrative ingredient,
an essential characteristic of judicial power is that its exercise affect the F
legal rights, status or obligations of persons who are subject to the
jurisdiction of the court or body in which the power is reposed. That
characteristic is not sufficient by itself to stamp a power as judicial but it
is an indispensable characteristic of all powers which are judicial.
[113] We agree with the submission of learned counsel for the respondent
G
that the exercise of judicial power does not exist merely because there is an
adjudication of an issue. The reasoning in the following cases supports our
conclusion:
(i) In the High Court of Australia’s decision of The Queen v. The Trade
Practices Tribunal and Others; (Ex Parte) Tasmanian Breweries Proprietary H
Limited [1970] ALR 449, the issue was whether the Trade Practices
Tribunal, in determining whether a trade agreement can be examined
and adjudicated upon as being an agreement against public policy, is
exercising judicial power. The majority judges decided:
(a) an adjudication or determination by the Tribunal was not an I
exercise of judicial power (see pp. 371, 375, 376, 378); and
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 617
A having the potential consequence, at the very least, that the accused so
sentenced will indeed be incarcerated until his death. It is an extreme
sentence. It is the most severe sentence which may lawfully be imposed
on an accused such as the one now before Court. It is a sentence which,
in the ordinary course, requires a meticulous weighing of all relevant
factors before a decision to impose it can be justified. […W]hatever the
B boundaries of separation of powers are eventually determined to be, the
imposition of the most severe penalty open to the High Court must fall
within the exclusive prerogative and discretion of the Court. It falls within
the heartland of the judicial power, and is not to be usurped by the
Legislature.
C [119] Dealing with the provision of the Constitution, the High Court
observed, that “[s]entencing is pre-eminently the prerogative of the courts”,
that the section of the Act in question “constitutes an invasion of the domain
of the Judiciary not by the Executive, but by the Legislature” and that a
criminal trial before an ordinary court requires, among other things, “an
D independent court which is empowered … in the event of a conviction, to
weigh and balance all factors relevant to the crime, the accused and the
interests of society before the imposition of sentence.”. The court concluded
that this:
… is not a trial before an ordinary court … [but] … a trial before a court
E in which, at the imposition of the prescribed sentence, the robes are the
robes of the judge, but the voice is the voice of the Legislature.
[120] The Constitutional Court of South Africa reversed the High Court’s
decision, saying that there is no absolute separation of powers between
judicial functions, on the one hand, and the Legislature and Executive on the
F other. The executive and legislative branches of a state have a very real
interest in the severity of sentences. The executive has a general obligation
to ensure that law-abiding persons are protected, if needs be, through the
criminal laws from persons who are bent on breaking the law. The executive
and legislative branches must have the power, through legislative means, of
G ensuring that sufficiently severe penalties are imposed on dangerous
criminals in order to protect the society.
[121] More importantly, the Constitutional Court held, that the regime,
inter alia, of prescribing minimum sentence under s. 51(1) of the Criminal
Law Amendment Act, 105 of 1997, is not inconsistent with the separation
H of power principle under the Constitution.
[122] A similar point was considered by the Privy Council in Ong Ah Chuan
v. PP [1981] AC 648. The issue concerns s. 15 of a Singapore statute which
provides for penalties for trafficking, importing and exporting drugs that
were graduate according to the quantity of the drug involved. Heroin
I attracted the death penalty where the quantity involved was 15 grammes or
more. The defendant argued that the mandatory death sentence was
unconstitutional. One of the arguments put forward was that the mandatory
620 Current Law Journal [2019] 5 CLJ
death penalty that excludes from the judicial function all considerations A
peculiar to the defendant in imposing sentence was wrong. In other words,
standardisation of the sentencing process which left little room for judicial
discretion to take account of variations in culpability within single offence
categories results in a function which ceases to be judicial.
B
[123] The Privy Council rejected the argument. Lord Diplock pointed out
at p. 672 that there is nothing unusual in a capital sentence being mandatory,
noting that at common law ‘all capital sentences were mandatory’. His
Lordship went on to say at p. 673 that, if the argument were valid, it would
apply to every law which imposed a mandatory fixed or minimum penalty
even where it was not capital – a consequence which His Lordship was C
plainly not prepared to accept.
[124] Lord Diplock’s decision was followed in Malaysia in PP v. Lau Kee
Hoo [1983] 1 CLJ 21; [1983] CLJ (Rep) 336; [1983] 1 MLJ 157. In this case,
the Federal Court considered the following question:
D
Whether or not the mandatory death sentence provided under
section 57(1) of the Internal Security Act, 1960 is ultra vires and violates
articles 5(1), 8(1) and 121(1) of the Federal Constitution.
The Federal Court then held, as follows:
Held:(1) it is clear from article 5(1) of the Federal Constitution that the E
Constitution itself envisages the possibility of Parliament providing for the
death penalty so that it is not necessarily unconstitutional;
…
(4) Capital punishment is not unconstitutional per se. In their judicial
F
capacities, judges are in no way concerned with arguments for or against
capital punishment. Capital punishment is a matter for Parliament. It is not
for judges to adjudicate upon its wisdom, appropriateness or necessity if
the law prescribing it is validly made;
(5) All criminal law involves the classification of individuals for the
purposes of punishment. Equality before the law and equal protection of G
the law require that like should be compared with like. What our Article
8(1) assures to the individual is the right to equal treatment with other
individuals in similar circumstances. Everybody charged under section
57(1) of the Internal Security Act, 1960, is liable to the same punishment
and therefore, it is not discriminatory;
H
(6) It is the function of the legislature not the judiciary to decide the
appropriate punishment for persons charged under the Internal Security
Act and the Arms Act. Provided that the factor which Parliament adopts
as constituting the dissimilarity in circumstances which justifies
dissimilarity in punitive treatment is not purely arbitrary but bears a
reasonable relation to the object of the law there is no inconsistency with I
article 8(1) of the Constitution. Article 8(1) is concerned with equal
punitive treatment for similar legal guilt, not with equal punitive treatment
for equal moral blameworthiness;
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 621
A [130] Earlier, in Mohd Alias Ibrahim v. RHB Bank Bhd, (supra), the same judge
had carefully delineated the function discharged by the SAC as opposed to
the function of the civil court. The critical feature that decides that the SAC
does not perform a judicial function is that it does not give a final decision
in the dispute between the parties. The learned judge observed as follows
B (at para. [102]):
The SAC cannot be said to perform a judicial or quasi-judicial function.
The process of ascertainment by the SAC has no attributes of a judicial
decision. The necessary attribute of the judicial decision is that it can give
a final judgment between two parties which carries legal sanction by its
C
own force. It appears to the court that before a person or persons or a
body or bodies can be said to exercise judicial powers, he or it must be
held that they derive their powers from the state and are exercising the
judicial power of the state. An attempt was made to define the words
‘judicial’ and ‘quasi-judicial’ in the case of Cooper v. Wilson and Others [1937]
2 KB 309. The relevant quotation reads:
D A true judicial decision presupposes an existing dispute between
two or more parties, and then involves four requisites: (1) the
presentation (not necessarily orally) of their case by the parties to
the dispute; … (4) a decision which disposes of the whole matter by a
finding upon the facts in dispute and application of the law of the land to
the facts so found, including where required a ruling upon any disputed
E
question of law. (emphasis added)
[131] It is axiomatic that the SAC does not finally dispose of the dispute
between the parties. It does not engage in the judicial process of determining
the rights of the parties. This is made clear in the Manual issued by Bank
F
Negara called the Manual for References to Shariah Advisory Council by the Civil
Court and Arbitrator (see copy exhibited as ‘MZKN-2’ of the BNM’s affidavit
dated 23 April 2018). In part B, para. 7 of the Manual, it is clearly stated
as follows:
[In] answering the questions referred by the court or arbitrator, the
G Shariah Advisory Council is aware that its role is merely to ascertain the
“hukum Syarak” (Islamic law) in relation to the issues where reference is
made. The Shariah Advisory Council does not have any jurisdiction to
make any finding of facts or to apply a particular “hukum” (principle) to
the facts of the case or to make a decision. Whether in relation to an issue
or for the case since such jurisdiction is vested with the court and
H arbitrator.
[132] It is relevant to note that in the present case, in giving its ruling under
s. 57, the SAC had scrupulously adhered to this principle. In the opening
paragraph of the ruling (see p. 300 of AR vol. 2), the SAC stated as follows:
In answering to the question posed by the Court, the SAC took note that
I
the SAC’s duty is merely to analyse the Syariah’s issues that are
contained in each question posed and to state the Hukum Syarak ruling
relating to the question. The SAC does not have jurisdiction to make a
624 Current Law Journal [2019] 5 CLJ
finding of facts or to apply the ruling to the facts of the case and to decide A
whether relating to an issue or for the case because this jurisdiction is
vested with the Court.
[133] It is clear acknowledgement by the SAC that it does not have the
jurisdiction to enter into the dispute between the parties by itself “applying
the ruling to the facts of the case” and coming to a final decision on the B
dispute. Further, we agree with the submission of learned counsel for the
respondent that the duty to ascertain Islamic law is conferred on the
Legislature and the SAC is the Legislature’s machinery to assist in resolving
disputes in Islamic banking. It does not exercise judicial power at all.
[134] In The Queen v. Trade Practices Tribunal; Ex parte Tasmanian Breweris Pty C
Ltd [1970] 123 CLR 361, cited by learned counsel for the respondent in her
argument, it was observed as follows (see p. 377):
Thus the work of the Tribunal is work which would be appropriate for the
legislature itself to do if it had the time to consider individual cases. It
would be obviously impracticable for the Parliament to apply its own ideas D
as to what is contrary to the public interest, either by passing a special Act
for every individual case or by laying down a definition which in every
case would be sure to produce a result satisfactory to it. There is probably
no practicable alternative to setting up an authority which with some but
incomplete guidance from the legislature will apply its own notions
E
concerning the public interest. This course the Trade Practices Act adopts,
contenting itself with prescribing the qualifications for membership of the
Tribunal, giving a limited measure of guidance, and then relying upon the
Executive’s choice of members to ensure, so far as assurance is possible,
that the notions applied will be such as the Parliament would approve. …
None of the powers of the Tribunal, then, involves any adjudication upon F
a claim of right.
[135] Similar observations were made in The Federal Commissioner of
Taxation v. Munro and British Imperial Oil Co Ltd v. Federal Commissioner of
Taxation (supra), where it was held at pp. 178-179:
Other matters may be subject to no a priori exclusive delimitation, but may G
be capable of assignment by Parliament in its discretion to more than one branch
of Government. Rules of evidence, the determination of the validity of parliamentary
elections, or claims to register trademarks would be instances of this class. The latter
class is capable of being viewed in different aspects, that is, as incidental
to legislation, or to administration, or to judicial action, according to
circumstances. Deny that proposition, and you seriously affect the recognised H
working of representative Government. Admit it, and the provision now under
consideration is fully sustained.
(emphasis added).
[136] It is clear, therefore, that it is open to the Legislature to establish the I
SAC as part of regulatory statute and to vest it with power to ascertain
Islamic law for the purpose of banking. This point has been very ably
considered by my learned brother Justice Azahar Mohamed FCJ in his
supporting judgment.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 625
A [137] Learned counsel for the respondent further submitted that disputes in
Islamic financial and banking matters are within the jurisdiction of the civil
courts, notwithstanding that Shariah law is involved. This is due to the fact
that Islamic banking and financial disputes do not and cannot fall within the
jurisdiction of Shariah Courts as finance and financial institutions are matters
B within the List I (Federal List) and outside of the List II (State List).
Furthermore, financial institutions (and some of their customers) do not
profess the religion of Islam.
[138] According to learned counsel for the respondent, we have a scenario
where matters lie within the jurisdiction of civil courts, but the civil courts
C are not equipped to make findings on Islamic law.
[139] With the greatest respect and deference to the learned judges of the
civil courts, we are of the humble opinion that the civil courts are not
sufficiently equipped to make findings on Islamic law. The same sentiments
were expressed in the following cases:
D
(i) In Bank Islam Malaysia v. Lim Kok Hoe & Anor And Other Appeals [2009]
6 CLJ 22; [2009] 6 MLJ 839, the Court of Appeal held at p. 37 (CLJ);
pp. 853-854 (MLJ):
In this respect, it is our view that judges in civil court should not
E take upon themselves to declare whether a matter is in accordance
to the religion of Islam or otherwise. As rightly pointed out by
Suriyadi J (as he then was) in Arab-Malaysian Merchant Bank Bhd v.
Silver Concept Sdn Bhd [2005] 5 MLJ 210 that in the civil court ‘not
every presiding judge is a Muslim, and even if so, may not be
sufficiently equipped to deal with matters, which ulama’ take years
F to comprehend’. Thus, whether the bank business is in accordance
with the religion of Islam, it needs consideration by eminent
jurists who are properly qualified in the field of Islamic
jurisprudence.
(emphasis added).
G (ii) In Tan Sri Abdul Khalid Ibrahim (supra) the High Court held at
p. 266 (CLJ); pp. 614-615 (MLJ):
Before I conclude, perhaps it would be useful for me to add a few
words as to why civil courts may not be sufficiently equipped to
deal with the issue whether a transaction under Islamic banking is
H in accordance to the religion of Islam or otherwise. Civil courts are
not conversant with the rubrics of Fiqh Al-Muamalat which is a highly
complex yet under-developed area of Islamic jurisprudence. In applying
Islamic law to determine the parties right under a contract, a civil judge had
to conduct an extensive inquiry into Islamic law and make an independent
determination of Shariah principles. (emphasis added).
I
[140] In order to appreciate whether a civil judge is competent to decide on
Shariah issues relating to Islamic banking and finance, perhaps an
understanding of the sources of Shariah is very important.
626 Current Law Journal [2019] 5 CLJ
The development of the Shariah also relies on other sources which are
termed as the secondary sources. These sources are formulated by the
scholars based on their deep understanding of the primary sources. These
sources are needed because there are a lot of new cases which did not
occur during the time of the Prophet s.a.w. and hence, new ijtihad is G
necessary in order to find the ruling. These sources are like qiyas,
maslahah, istihsan, istishab, saddzari’ah, ‘urf, maqasidshar’iyyah,
siyasahshar’iyyah and many more. The basis for these secondary sources
is a hadith of the Prophet s.a.w. when he appointed Muaz as a judge in
Yemen. The Prophet s.a.w. asked Muaz that what he would do to solve
disputes while in Yemen. The Prophet s.a.w. said: “How will you judge H
when the occasion of deciding a case arises?” He replied; I shall judge in
accordance with Allah’s Book. The Prophet PBUH then asked him,
“What will you do if you do not find guidance in Allah’s Book? He
replied: I will act in accordance with the Sunnah of the Prophet s.a.w. The
Prophet PBUH asked him again, “What will you do if you do not find
I
guidance in the Sunnah of the Prophet s.a.w.? He replied: I shall do my
best to form an opinion and spare no pains. The Prophet s.a.w. then
patted him on the breast and said: “Praise be to Allah s.w.t. who helped
the Messenger of Allah s.w.t. to find a thing which pleases the Prophet
s.a.w. (Nyazee, 2002).
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 627
A Ijtihad means striving to the utmost to discover the law from the texts
through all possible means of valid interpretation (Nyazee, 2002). Its
validity is derived from divine revelation and hence is always in harmony
with the Qur’an and the Sunnah (Kamali, 1991). The scholar who
performs ijtihad must possess the appropriate qualification such as the
knowledge of the sources of the Shariah, knowledge of Arabic and
B familiarity with the prevailing customs of society, upright character, as well
as the ability to formulate independent opinion and judgment (Kamali,
2006). As far as the modern transaction is concerned, the ijtihad is
significant in order to extend the ruling to new cases that are not covered
clearly by the Qur’an and the Sunnah. Therefore the function of the
mujtahid to derive the new ruling for the new case from the general
C
principles available in the Qur’an and the Sunnah. The mujtahid therefore
must open their minds to the current development and realities and to
interpret the whole text in its totality by looking at the objectives of the
Shariah in order to materialise its ultimate objectives in any particular
issue. (Islamic Capital Market, 2009).
D (See also Fathullah Al Haq Muhamad Asni & Jasni Sulong, “The Model of
Instinbat by the Shariah Advisory Council of Central Bank Malaysia”.
(International Journal of Academic Research in Business and Social Science,
Vol. 8, No. 1 January 2018).
[142] We agree with the contention of learned counsel for the first
E
intervener that the SAC has been harmonising the proliferation of Shariah
opinions in the industry since its inception. It was already accustomed to the
practical considerations at hand and the need for certainty in the industry on
Islamic banking principles. Therefore, the binding nature of the ruling of the
SAC is justified as s. 56 of the 2009 Act was enacted on the reason of
F conserving and protecting the public interest.
[143] It is pertinent to note that the rulings of the SAC are made through the
exercise of collective ijtihad. The SAC comprises prominent scholars and
Islamic finance experts, who are qualified individuals with vast experience
and knowledge in various fields, especially in finance and Islamic law, to
G
ensure robust and comprehensive deliberation before the issuance of the
rulings.
[144] The appointment of the members of the SAC is provided for in s. 53
of the 2009 Act. Section 53(1) states that the Yang di-Pertuan Agong may,
H
on the advice of the Minister after consultation with the bank, appoint from
among persons who are qualified in Shariah or who have knowledge or
experience in the Shariah and in banking, finance, law or such other related
disciplines as members of the SAC. Judges of the Civil and Shariah Courts
can also be appointed as members of the SAC. However, if a judge is to be
appointed as a SAC member, the appointment must be done in accordance
I
with s. 53(2) which says that:
If a judge of the High Court, the Court of Appeal or the Federal Court,
or a judge of the Shariah Appeal Court of any State or Federal Territory,
is to be appointed under subsection (1), such appointment shall not be
628 Current Law Journal [2019] 5 CLJ
made except – (a) in the case of a judge of the High Court, the Court A
of Appeal or the Federal Court, after consultation by the Bank with the
Chief Justice; and (b) in the case of a judge of the Shariah Appeal Court
of any State or Federal Territory, after consultation by the Bank with the
Chief Shariah Judge of the respective State or Federal Territory, as the
case may be.
B
Semenyih Jaya Case
[145] We now turn to the Semenyih Jaya case. In the course of his argument,
learned counsel for the applicant emphatically relied on the decision of
Semenyih Jaya case in support of his contention that the impugned provisions
are unconstitutional and liable to be struck off. We agree with the C
submissions of the learned counsel for the respondent and the interveners that
Semenyih Jaya case does not support the position being advanced by the
applicant that the conferment of the power to ascertain the Islamic law for
Islamic banking on the SAC is an incursion into the judicial power of the
Federation. The factual matrix in the Semenyih Jaya case is poles apart from D
the factual matrix of the case under our consideration. In the Semenyih Jaya
case, the impugned s. 40D of the Land Acquisition Act 1960 provided for
the final decision on compensation for compulsory acquisition to be
determined not by the judge but by the two assessors sitting with him in the
High Court.
E
[146] In short, the offending part of s. 40D was that it empowers the
assessors, and not the judge to determine conclusively, and therefore finally,
the very issue before the High Court, namely, the amount of compensation
to be awarded to the landowner.
[147] The test is whether there has been a ‘take-over of the judicial power F
of the court’ by non-judicial personages. Zainun Ali FCJ explained why
s. 40D was an encroachment of the judicial power at para. [95]):
(I)n our view, Section 40D of the Act has a wider reach. The implications
of the language of s 40D(1) and (2) of the Act is that the assessors in
effect take over the judicial power of the court enshrined under art 121(1) G
of the Federal Constitution in deciding on a reasonable amount of
compensation in land reference matters. The judicial power to award
compensation has been whittled away from the High Court Judge to the
assessors in breach of art 121 of the Federal Constitution.
[148] It is clear, therefore, the test is whether the very matter placed before H
the court of law as the dispute between the parties for final decision has been
usurped by persons other than judges. In a land reference case under the Land
Acquisition Act 1960, the dispute is over the amount of compensation.
Section 40D permits the assessors to decide finally on this very issue. The
Federal Court observed further at paras [51-52]: I
It would appear that he (the judge) sits by the side-line and dutifully
anoints the assessors’ decision. Section 40D of the Act therefore
effectively usurps the power of the court in allowing persons other than
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 629
A the judge to decide on the reference before it. This power to decide a
matter which is brought before the court is known as judicial power and
herein lies the rub.
[149] Unlike the assessors in the land reference proceedings, the SAC in
ascertaining the Islamic law for Islamic banking, does not conclusively and
B finally determine the rights between the parties. The contest between parties
remains with the adjudicating judge.
Reference Question 1(c)
[150] This reference question was not vigorously pursued by learned counsel
C for the applicant. Be that as it may, for the sake of completeness, we will
discuss the issues raised by the applicant. The nub of the learned counsel for
the applicant’s submission on this issue is that the impugned provisions
deprived a litigant substantive process. The short answer is this. Article 8 of
the FC deals with equality before the law and equal protection of the law and
that equality means that people who are in like circumstances should be
D
treated equally. Numerous cases in the apex court confirm that art. 8 does
not apply to all persons in any circumstances but rather it applies to persons
under like circumstances.
[151] In order to determine whether a law is discriminatory under art. 8,
E “the validity of a law relating to equals can therefore only be properly tested
if it applies alike to all persons in the same group”. (See Danaharta Urus
Sdn Bhd v. Kekatong Sdn Bhd [2004] 1 CLJ 701; [2004] 2 MLJ 257).
[152] In the case of a reference made pursuant to s. 56(1)(b) of the 2009 Act,
parties involved are allowed to provide their own Shariah expert’s views on
F the Shariah question(s). In fact, in these present applications, the applicant
provided to SAC its own Shariah expert’s view on the issue.
Reference Question 2(a)
Expert Evidence
G [153] Learned counsel for the applicant finally contended that if the
impugned provisions are constitutional, the party should be entitled to lead
expert evidence and for the court to consider expert evidence on question
concerning Islamic law for Islamic financial business.
[154] We are not persuaded with the submission. The civil courts are not
H in a position to appreciate and determine the divergences of opinions among
the experts and to decide based on Shariah principles. The proposition has
been expounded in Mohd Alias (supra) where the learned judge observed that:
122. There is neither rhyme nor reason for the court to reject the function
of the SAC in ascertaining which Islamic law to be applied by the civil
I courts in deciding a matter. Should this function be ignored, it would
open the floodgate for lawyers and cause a tsunami of applications to call
any expert at their own interest and benefit, not only from Malaysia but
630 Current Law Journal [2019] 5 CLJ
also other countries in the world who might not be familiar to our legal A
system, administration of Islamic law and local conditions just to
challenge the Islamic banking transaction in this country.
[155] The same sentiment has been repeated by the learned judge in the case
of Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd [2012] 3 CLJ 249;
[2012] 7 MLJ 597: B
A Conclusion
[160] For the foregoing reasons, the impugned provisions are not in breach
of the FC and unconstitutional on either basis advanced by learned counsel
for the applicant. We answer the questions referred to us for our
determination as follows:
B
No.1
(a) In the negative
(b) In the negative
C (c) In the negative.
No. 2 (alternative question)
In the negative.
[161] We order that this case be remitted to the High Court for further
D directions.
Azahar Mohamed FC (concurring):
[162] I have read the judgment in draft of my learned brother Justice Mohd
Zawawi Salleh. I agree with the opinion expressed on the various issues
E raised and the conclusion arrived at by His Lordship.
[163] While I agree with my learned brother as regards the conclusion, I
would like to express my own views and add the following reasons on the
fundamental question of whether ss. 56 and 57 of the Central Bank of
Malaysia Act 2009 (“the impugned provisions”) are in breach of the Federal
F Constitution and unconstitutional by reason of contravening Part IX of the
Federal Constitution for the said sections having the effect of vesting judicial
power in the Shariah Advisory Council (“SAC”).
[164] In other words, the fundamental constitutional issue raised in this
constitutional reference is whether the impugned provisions violate the
G
doctrine of separation of powers, by being an impermissible Parliament
intrusion into judicial powers.
[165] As a starting point, it is pertinent to note that as the highest law of the
land, the Federal Constitution provides the framework within which the
various branches of the Government operate. It is premised on the
H
fundamental principle that the Federal Constitution is the ultimate source of
all lawful authority in the country. In Ah Thian v. Government of Malaysia
[1976] 1 LNS 3; [1976] 2 MLJ 112, this court reiterated the fundamental
principle that the Federal Constitution is the supreme law of the Malaysian
Federation. One of the essential features of the Malaysian Federation is that
I its institutions and their powers and authorities are regulated by the Federal
Constitution (see Constitutional Federalism in Malaysia by JC Fong, 2nd edn
at para. 3.006).
632 Current Law Journal [2019] 5 CLJ
F [170] In Jayantilal Amrit Lal Shodhan v. FN Rana And Others [1964] AIR 648,
[1964] SCR (5) 294, the Supreme Court of India had occasion to lay down
the constitutional principles that the Constitution has not made an absolute
or rigid division of functions between the three branches of the Government.
In this case, the President of India issued on 24 July 1959, a notification
under art. 258(1) of the Constitution entrusting with the consent of the
G
Government of Bombay to the Commissioners of Divisions in the State of
Bombay the functions of the Central Government under the Act in relation
to the acquisition of land for the purposes of the union. By the Bombay
Reorganisation Act 11 of 1960, two new States were constituted and the
Baroda division was allotted to the State of Gujarat. Purporting to exercise
H the powers entrusted by the notification issued by the President on 24 July
1959, the Commissioner of Baroda Division notified under s. 4(1) of the
Land Acquisition Act 1 of 1894, the appellants’ land as being needed for a
public purpose, and authorised the Special Land Acquisition Officer,
Ahmedabad to perform the functions of the collector under the Act. After
I considering the objections raised by the appellant to the proposed
acquisition, the Special Land Acquisition Officer submitted his report to the
Commissioner, who issued the declaration under s. 6(1) of the Act. The
634 Current Law Journal [2019] 5 CLJ
appellant thereupon moved the High Court of Gujarat under arts. 226 and A
227 of the Constitution for a writ but his petition was dismissed. The case
of the appellant, among others, was that the proceeding under s. 5A of the
Act being quasi-judicial in character, authority to make a report thereunder
could not be delegated by the Commissioner nor could he consider such a
report when made. In delivering the judgment of the majority, Shah J had B
this to say:
It cannot however be assumed that the legislative functions are
exclusively performed by the legislature, executive functions by the
executive and judicial functions by the judiciary alone. The Constitution
has not made an absolute or rigid division of functions between the three C
agencies of the State. To the executive, exercise of functions legislative
or judicial are often entrusted. For instance power to frame rules,
regulations and notifications which are essentially legislative in character
is frequently entrusted to the executive. Similarly judicial authority is also
entrusted by legislation to the executive authority: Harinagar Sugar Mills
Ltd v. Shyamsundar. In the performance of the executive functions, public D
authorities issue orders which are not far removed from legislation and
make decisions affecting the personal and proprietary rights of individuals
which are quasi-judicial in character. In addition to these quasi-judicial, and
quasi-legislative functions, the executive has also been empowered by
statute to exercise functions which are legislative and judicial in character,
and in certain instances, powers are exercised which appear to partake at E
the same moment of legislative, executive and judicial characteristics. In
the complexity of problems which modern Governments have to face and
the plethora of parliamentary business to which it inevitably leads, it
becomes necessary that the executive should often exercise powers of
subordinate legislation: Halsbury’s Laws of England, Vol 7, Art. 409. It is
indeed possible to characterise with precision that an agency of the State F
is executive, legislative or judicial, but it cannot be predicated (1) [1962]
2 S.C.R. 339 that a particular function exercised by any individual agency
is necessarily of the character which the agency bears.
[171] It is in this context that I approach the fundamental constitutional
question at hand as set out earlier. G
[172] Thus, turning now to the question, what is important in the setting of
the present constitutional reference is that the constitutional scheme of the
Federal Constitution empowers Parliament, the legislative branch of the
Government, to make laws with respect to any of the matters enumerated,
H
among others, in the Federal List as set out in the Ninth Schedule. Item 4(k)
of the Federal List in the Ninth Schedule expressly empowers Parliament to
make laws with respect to:
4. Civil and criminal law and procedure and the administration of justice
including:
I
(k) Ascertainment of Islamic law and other personal laws for the
purposes of federal law.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 635
A [173] It is uncontroverted that item 4(k) of the Federal List, Ninth Schedule
of the Federal Constitution vests legislative competence in Parliament to
enact laws aimed at ascertaining Islamic law and other personal laws for
purposes of Federal law. The legal consequence of the constitutional
arrangement is that, the ascertainment of Islamic law for the purposes of
B federal law has been assigned by the Federal Constitution to a specific branch
of Government, that is to say, the legislative branch. The words could have
no room for doubt as they are expressed in very imperative and conclusive
terms. The mandatory wording in the provisions is absolute and does not
admit any exceptions or exemption. I emphasise that in so far as our Federal
C
Constitution is concerned, ascertainment of Islamic law for the purposes of
Islamic financial business falls under the legislative power and thus, in my
opinion, powers and discretion on such matters are neither inherent nor
integral to the judicial function.
[174] What then is the legislative mechanism to ascertain the applicable
D Islamic law in relation to any aspect of Islamic financial business? The
Federal Constitution is silent on the methodology to be used to ascertain
Islamic law for that purpose. In my opinion, it falls entirely within the
powers and discretion Parliament to decide how this should be exercised.
One of the important features of our Federal Constitution is that it does not
E
contain any express prohibition upon the exercise of legislative powers by
the Executive or of judicial powers by either the Executive or the
Legislature. Lord Diplock speaking for the Privy Council makes this very
point in Hinds v. The Queen [1977] AC 195:
It is taken for granted that the basic principle of separation of powers will
F apply to the exercise of their respective functions by these three organs
of Government [viz, the Legislature, the Executive and the Judiciary].
Thus the constitution does not normally contain any express prohibition
upon the exercise of legislative powers by the executive or of judicial
powers by either the executive or the legislature.
[175] Within the framework of the Federal Constitution, Parliament is
G
endowed with plenary powers of legislation. Parliament in its discretion is
legally empowered to assign or delegate its power of ascertaining what is the
applicable Islamic law in relation any aspect of Islamic financial business to
any branch of the Government or to any administrative body. Support for
this approach is to be found in the two decisions of the High Court of
H Australia that were cited by learned counsel for the respondent.
[176] First, the important case of The Federal Commissioner of Taxation
v. Munro [1926] 38 CLR 153, which concerns a Taxation Board of Review
to review the decisions of the Commissioner of Taxation as to the amount
of tax payable. The High Court of Australia had recognised that the
I
Australian Parliament was empowered to make laws in respect of taxation
by virtue of s. 51 of the Australian Constitution. It then went on to state that
the Board of Review, which was established pursuant to the Income Tax
636 Current Law Journal [2019] 5 CLJ
A [178] It can be seen from the foregoing discussion that save in respect of
certain matters where one branch of Government should not exercise the
functions of another, other matters may be capable of assignment by
Parliament in its discretion to more than one branch of Government or for
that matter to any administrative body. In my opinion, the present case does
B not fall within any of the matters in which one branch of Government should
not exercise the functions of another. Applying this approach, it falls within
the discretion of our Parliament to decide how the ascertainment of Islamic
law should be put into effect.
[179] As the legislative branch of the Government, Parliament could
C legislate a body of laws to ascertain what is the Islamic law applicable on any
transactional dispute. However, in the complexity and variety of problems
that Islamic financial business have to face in the present dynamic business
environment, such a methodology is highly impracticable and may cause
serious inefficiency. Instead, as it turned out, Parliament, as a matter of
D policy, recognised a need for the establishment of a single point of reference
for the purposes of ascertainment of Islamic laws in relation to Islamic
financial business. To this end, Parliament in its wisdom has taken steps, as
part of its legislative process, in enacting several legislations to establish SAC
in order to support and facilitate the operation of Islamic banking in
E
Malaysia. Parliament had passed the requisite legislations, which in effect
assigns or delegates its powers to the SAC to ascertain what is the applicable
Islamic law for the business.
[180] The objective behind the establishment of the SAC as the ultimate
authority for the ascertainment of Islamic law for the purposes of Islamic
F financial business is to act as the single point of authoritative reference to
ensure consistency and certainty in the application of Islamic principles in
Islamic financial business.
[181] In the Central Bank of Malaysia’s affidavit of 23 April 2018 filed in
the present proceedings affirmed by the Assistant Governor, it has been
G stated that the necessity for a single authority to ascertain Islamic law for the
purpose of Islamic financial business arose because of the rapid increase in
the number of players in Islamic banking and finance in the country over the
years, the rising complexities of Islamic finance products and the
corresponding increase in disputes. An unsatisfactory feature of the
H resolution of the disputes before the civil courts previously has been the
reliance on various differing sources of Islamic principles.
[182] As submitted by learned counsel for Central Bank of Malaysia
(“CBM”), it is an acknowledged fact that diversity of opinion among experts
on Islamic legal principles had led to uncertainty in the Islamic banking
I industry that affected the stability of the Islamic financial system to the
638 Current Law Journal [2019] 5 CLJ
detriment of the economy (citing Malayan Banking Bhd v. Ya’kup Oje [2007] A
1 LNS 451; [2007] 6 MLJ 389, Arab-Malaysian Finance Bhd v. Taman Ihsan
Jaya Sdn Bhd & Ors; Koperasi Seri Kota Bukit Cheraka Bhd (Third Party) And
Other Cases) [2009] 1 CLJ 419; [2008] 5 MLJ 631, Bank Islam Malaysia Bhd
v. Lim Kok Hoe & Anor And Other Appeals [2009] 6 CLJ 22; [2009] 6 MLJ
839). B
[183] In the case of Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia
Berhad & Anor [2010] 4 CLJ 388, Rohana J (now FCJ) explained why
Parliament deemed it fit and necessary to designate the SAC to ascertain the
acceptable Islamic law:
C
Taking cognizance that there will always be differences in views and
opinions on the Syariah, particularly in the area of muamalat, there will
inevitably be varied opinions on the same subject … It must be in
contemplation of the differences in these views and opinions in the area
of muamalat that the legislature deems it fit and necessary to designate
the SAC to ascertain the acceptable Syariah position. D
[184] The same point was made by Mohd Salleh Zawawi J (now FCJ) in the
case of Mohd Alias Ibrahim v. RHB Bank Bhd & Anor [2011] 4 CLJ 654:
In the light of the above, to ensure that the development of Islamic
financial instruments progresses smoothly and orderly, the establishment
of one supervisory authority in a country is very important. This E
supervisory authority should have the power to regulate a uniformed
interpretation of Islamic law within the sphere of Islamic finance and
banking in that country and may choose the best opinion in its decision-
making process after taking into consideration all of the authorities,
custom of the locality etc.
F
[185] Among the challenges facing the Islamic financial services industry
are the development of financial services and instruments that are
Shariah-compliant, commercially viable, valid and enforceable, based on the
prevailing governing laws (see The New Central Bank of Malaysia Act 2009
(Act 701): Enhancing the Integrity and Role of the Shariah Advisory Council G
(SAC) in Islamic Finance by Hakimah Yaacob). Consequently, the SAC was
established to preclude any uncertainties in the interpretation of Islamic laws
with regard to Islamic financial business. The SAC was established pursuant
to s. 124 of the (now repealed) Banking and Financial Institutions Act 1989,
which was amended vide the Banking and Financial Institutions (Amendment)
H
Act 1996. The amending Act had amended s. 124(7) to state as follows:
(7) For the purposes of this section
(a) there shall be established a Syariah Advisory Council which shall
consist of such members, and shall have such functions, powers and
duties as may be specified by the Bank to advise the Bank on the I
Syariah relating to Islamic banking business or Islamic financial
business;
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 639
A [186] It was as a result of all the above that the Central Bank of Malaysia
Act 1958 (“the 1958 Act”) was then amended to introduce s. 16B, which
came into force on 1 January 2004. Section 16B of the 1958 Act provided
for the SAC to become the authority for the ascertainment of Islamic law for
Islamic banking business, takaful business, Islamic financial business,
B Islamic development financial business or any other business which is based
on Shariah principles that are supervised and regulated by CBM.
[187] One important point has to be highlighted: Parliament plainly had
complete constitutional powers to enact these impugned provisions
(see Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd [2013]
C 4 CLJ 794; [2013] 3 MLJ 269 and Sulaiman Takrib v. Kerajaan Negeri
Terengganu; Kerajaan Malaysia (Intervener) & Others [2009] 2 CLJ 54).
[188] It is relevant to note that Parliament in debating the proposed
amendment to incorporate s. 16B into the 1958 Act, had the following goals
in mind. At the Dewan Rakyat:
D
Memperkemaskan rangka kerja perundangan dan syariah bagi sektor
kewangan dan perbankan Islam dan memperluaskan skop aktiviti Bank
Negara yang selari dengan kehendak Syariah.
Kewujudan suatu rangka kerja perundangan yang lebih menyeluruh bagi
sektor kewangan dan perbankan Islam adalah amat penting terutamanya
E
dalam memastikan keseragaman pendapat Syariah yang berkaitan system
perbankan dan kewangan Islam.
[189] In the context of civil disputes in court relating to Islamic finance,
s. 16B(8) of the 1958 Act provides:
F (B) Where in any proceedings relating to Islamic banking business, takaful
business, Islamic financial business, Islamic development financial
business, or any other business which is based on Syariah principles and
is supervised and regulated by the Bank before any court or arbitrator any
question arises concerning a Syariah matter, the court or the arbitrator, as
the case may be, may:
G
(a) take into consideration any written directives issued by the Bank
pursuant to subsection (7); or
(b) refer such question to the Syariah Advisory Council for its ruling.
[190] Pursuant to s. 16B of the 1958 Act, the rulings made by the SAC were
H of a non-binding nature on the courts. Section 16B(9) of the 1958 Act
provides:
(9) Any ruling made by the Syariah Advisory Council pursuant to a
reference made under paragraph (8)(b) shall, for the purposes of the
proceedings in respect of which the reference was made:
I
(a) if the reference was made by a court, be taken into consideration
by the court in arriving at its decision; and
(b) if the reference was made by an arbitrator, be binding on the
arbitrator,
640 Current Law Journal [2019] 5 CLJ
[191] Pursuant to the above, the courts were not compelled to make a A
reference to the SAC with regard to any Islamic and/or Shariah principles
nor be compelled to take into consideration the SAC’s rulings.
[192] Following the rapid growth of Islamic financial business in Malaysia,
the number of disputes in relation to Islamic banking products in the civil
B
courts however rose significantly. However, as s. 16B of the 1958 Act was
non-compulsory in nature in terms of referring a Shariah issue to the
SAC, the courts took it upon themselves to determine if a facility was
Shariah-compliant or not. This approach resulted in the wide-ranging,
inconsistent decisions with regard to the principles of Al-Bai’ Bithaman Ajil
(BBA) (see Arab-Malaysian Merchant Bank Bhd v. Silver Concept Sdn Bhd [2008] C
1 LNS 347; [2008] 6 MLJ 295, Malayan Banking Bhd v. Marilyn Ho Siok Lin
[2006] 3 CLJ 796; [2006] 7 MLJ 249, Malayan Banking Bhd v. Ya’kup Oje
[2007] 1 LNS 451; [2007] 6 MLJ 389, Arab-Malaysian Finance Bhd v. Taman
Ihsan Jaya Sdn Bhd & Ors; Koperasi Seri Kota Bukit Cheraka Bhd (Third Party)
And Other Cases) [2009] 1 CLJ 419; [2008] 5 MLJ 631). D
[193] In the face of this, the question arose during that time as to the solution
to this increasing challenge. Thus, in line with the Parliament’s aim and
policy of providing certainty and to prevent incoherent and anomalous
decisions in Islamic financial cases, ss. 56 and 57 of the 2009 Act, were
introduced. E
[194] As a result, in 2009, the 1958 Act was repealed and replaced by the
Central Bank of Malaysia Act 2009 (“the 2009 Act”), which came into force
on 25 November 2009. The 2009 Act also introduced the impugned
provisions that made the SAC the authority for the ascertainment of Islamic
F
law with regard to Islamic financial business. The SAC was set up by
Parliament to ascertain what is the applicable Islamic law in relation to any
aspect of Islamic financial business.
[195] Section 51 of the 2009 Act authorised the establishment of the SAC
by CBM. It provides:
G
(1) The Bank may establish a Shariah Advisory Council on Islamic
Finance which shall be the authority for the ascertainment of Islamic law
for the purposes of Islamic financial business.
(2) The Shariah Advisory Council may determine its own procedures.
H
[196] Section 52 of the 2009 Act further provides for the functions of the
SAC:
(1) The Shariah Advisory Council shall have the following functions:
(a) to ascertain the Islamic law on any financial matter and issue a
ruling upon reference made to it in accordance with this Part; I
(b) to advise the Bank on any Shariah issue relating to Islamic financial
business, the activities or transactions of the Bank;
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 641
Prosecutor [2012] 4 SLR 947, this ‘reflects more the functional efficiency of A
the constitutional arrangement’ of our Federal Constitution. I will delve into
this case in the later part of this judgment. For now, it is important to note
that under this constitutional arrangement, the courts are duty-bound to refer
Shariah issues arising from Islamic banking and finance to the SAC, but more
importantly they are legally obliged to adopt the SAC’s ruling to the disputed B
matters. The key point to note here is that this should be looked at as a proper
constitutional mechanism in order to assist the courts in applying the correct
Islamic laws to resolve Islamic financial disputes and upholding Shariah
compliance in such matters, as permitted by the Federal Constitution.
Within the framework of the Federal Constitution, the SAC and the courts C
have to operate with some level of integration if our Islamic banking and
Islamic financial services are to function well. In this context, I think it is
pertinent to refer to the remarks made by Lord Reed at the recent 32nd
Sultan Azlan Shah Law Lecture, 2018 entitled Politics and the Judiciary,
where Lord Reed, among others, said:
D
But neither the separation of powers, nor the principle of judicial
independence, means that the courts have to be isolated from the other
branches of the state. Although the different functions of the state are
best performed by different institutions, those institutions have to operate
with some degree of integration if society is to function well. This point
was well made by Justice Robert Jackson of the United States Supreme E
Court in the case of Youngstown Sheet and Tube Co v. Sawyer, where he said:
While the Constitution diffuses power the better to secure liberty,
it also contemplates that practice will integrate the dispersed
powers into a workable Government. It enjoins upon its branches
separateness but interdependence, autonomy but reciprocity. F
[201] The powers of the SAC and the courts to ascertain any Shariah issues
that may arise in Islamic banking and financial disputes are for all intent and
purposes powers delegated by Parliament to the SAC and the courts. The
implication of the courts deriving their power from a delegated legislative
power was considered in the Singapore High case of Mohammad Faizal (supra). G
An important feature of Mohammad Faizal (supra) is this that our Federal
Court in the case of Indira Gandhi Mutho v. Pengarah Jabatan Agama Islam
Perak & Ors and Other Appeals [2018] 3 CLJ 145; [2018] 1 MLJ 545 accorded
approval to the decision in Mohammad Faizal (supra) in determining the
scope, nature and the meaning of “judicial power”. H
[202] In Mohammad Faizal (supra) the accused that had previously been
admitted into a Drug Rehabilitation Centre (“the Centre”) twice, was
charged with a drug offence under the Misuse of Drugs Act (‘MDA”) for the
consumption of morphine. The relevant section of the MDA provided that
where someone is found guilty of a relevant drug-related offence and had two I
prior centre admissions this would trigger an enhanced punishment regime.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 643
the courts to ascertain Islamic law for the purposes of resolving disputes on A
Islamic financial matters. This is not stripping the Judiciary of its powers.
Neither the Executive nor Legislature usurps or intrudes the sphere of
judicial powers.
David Wong Dak Wah CJ (Sabah & Sarawak) (dissenting):
B
Introduction
[204] This matter came before us by way of reference emanating from the
decision of the Court of Appeal on 15 May 2017 which allowed an
application filed by the applicant in the High Court pursuant to art. 128(2)
of the Federal Constitution and s. 84 of the Courts of Judicature Act 1964 C
to refer questions to the Federal Court in respect of the constitutionality of
ss. 56 and 57 of the Central Bank of Malaysia Act 2009 (CBMA 2009).
[205] The two constitutional questions are as follows:
Question 1 D
Whether sections 56 and 57 of the Central Bank of Malaysia Act 2009
(CBMA 2009) are unconstitutional and void for:
(a) Contravening Article 74 of the Federal Constitution read together
with the Ninth Schedule of the Federal Constitution for the Shariah
Advisory Council (SAC) having been vested with the power to E
ascertain Islamic Law;
(b) Contravening Part IX of the Federal Constitution for the said
sections having the effect of vesting judicial power in the SAC;
(c) Contravening Article 8 of the Federal Constitution for the said
sections having the effect of denying a litigant substantive due F
process.
Question 2
If the above is answered in the negative:
(a) Whether a court nonetheless is entitled to admit and consider G
expert evidence on any question concerning a Shariah matter
relating to Islamic financial business.
Background Facts
[206] The material facts upon which the constitutional questions are posed
H
are these. The applicant in the High Court is the first defendant -
JRI Resources Sdn Bhd, whereas the respondent is the plaintiff - Kuwait
Finance House (Malaysia) Berhad.
[207] Sometime in 2008, the applicant was given by the respondent various
Islamic credit facilities (the facilities), namely five ljarah Muntahiah Bitamlik I
facilities (the ljarah facilities) and a Murabahah Tawarruq Contract Financing
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 645
A facility (MTQ facility). The guarantors for the aforesaid facilities were Ismail
bin Kamin, Zulhizzan bin Ishak and Norazam bin Ramli who are the second,
third and fourth defendants respectively.
[208] The purpose of the facilities was to facilitate the leasing of shipping
vessels by the applicant from the respondent which had with its own fund
B
purchased the same at the request of the applicant. As owner of the shipping
vessels, they are then leased to the applicant.
[209] The applicant defaulted in making monthly lease payments under
the facilities, resulting in the respondent’s calling on the guarantors to
remedy the applicant’s defaults. The guarantors also failed to remedy the
C
obligations of the applicant under the facilities.
[210] To recover the amounts owing under the facilities, the respondent took
legal action against the applicant and guarantors on 2 September 2013.
[211] A summary judgment application was taken by the respondent
D against the applicant and the guarantors and on 3 October 2014, the High
Court granted summary judgment against the applicant and the guarantors in
the sum of RM118,261,126.26 as at 8 November 2013 together with
compensation fees.
[212] In the summary judgment application proceedings, the applicant had
E
argued that in view of the respondent’s failure to carry out the major
maintenance works on the shipping vessels, there was a failure to derive
income from the charter proceeds (from leasing the shipping vessels). The
aforesaid argument was premised on the contention that the carrying out of
the major maintenance works on the shipping vessels was the responsibility
F of the respondent, as owner of the shipping vessels. Such contention is
contrary to the express wordings in cl. 2.8 of the ljarah agreements which
reads as follows:
Notwithstanding the above clause 2.7, the Parties hereby agree that the
Customer (meaning the Applicant here) shall undertake all of the Major
G Maintenance as mentioned herein and the Customer will bear all the
costs, charges and expenses in carrying out the same.
(emphasis added)
[213] Appeals by the applicant and the guarantors were lodged to the Court
H of Appeal against the summary judgment and on 15 September 2015, counsel
for the applicant at the proceeding before the Court of Appeal had submitted
that cl. 2.8 of the ljarah agreements was not Shariah-compliant as the same
made it the obligation of the customer (the applicant herein) to bear all the
costs of maintaining the shipping vessels (including undertaking major
maintenance). The applicant further submitted that the High Court ought to
I
have referred this issue to the Shariah Advisory Council of Bank Negara
Malaysia (the SAC) pursuant to s. 56 of the CBMA 2009.
646 Current Law Journal [2019] 5 CLJ
[214] The Court of Appeal after hearing respective submissions from the A
parties on 15 September 2015 allowed the appeals and set aside the summary
judgment. The Court of Appeal further remitted the case to the High Court
for trial with a consequent order to the High Court that a reference be made
to the SAC on the following question:
Whether clause 2.8 of the ljarah Agreements (which makes it the B
obligation of the Customer, to bear all the costs of maintaining the leased
vessels including major maintenance), is Shariah compliant” (the Issue)
[215] The Shah Alam High Court in early 2016 referred the aforesaid
question to the SAC.
C
[216] Through a letter dated 30 June 2016 (the SAC letter), the SAC made
the following reply (English translation as per second intervener’s
submission):
COURT’S REFERENCE TO BANK NEGARA MALAYSIA’S
SHARIAH ADVISORY COUNCIL (CIVIL SUIT NO. 22NCVC-584-09/ D
2013)
KUWAIT FINANCE HOUSE (MALAYSIA) BERHAD VS JRI
RESOURCES SDN BHD, ISMAIL BIN KAMIN, ZULHIZZAN BIN
ISHAK @ MUHAMAD & NORAZAM BIN RAMLI
Introduction: E
In answering to the question posed by the Court, the SAC took note that
the SAC’s duty is merely to analyse the Syariah’s issues that are
contained in each question posed and to state the Hukum Syarak ruling
relating to the question. The SAC does not have jurisdiction to make a
finding of facts or to apply the ruling to the facts of the case and to decide F
whether relating to an issue or for the case because this jurisdiction is
vested with the court.
Referred Question:
Whether clause 2.8 in all ljarah Agreement (4 in total) between the
Plaintiff and its customer (the 1st Defendant) is Shariah compliant, in the G
light of the Shariah Advisory Council resolution made during its 29th
meeting on 25.9.2002, the 36th meeting dated 26.6.2003 and the 104th
meeting dated 26.8.2010.
Answer:
After referring to the decision of the SAC’s earlier meeting, concerning H
the issue of the cost of maintenance of ijarah’s asset, the SAC has
decided that in principle, the maintenance cost relating to the ownership
of ijarah’s asset is the responsibility of the owner, meanwhile the cost
relating to the usufruct of the rental is the responsibility of the lessee.
Nevertheless, there are few arrangements that were allowed by the SAC
which are: I
(i) The owner of the asset can delegate to the lessee to bear the
maintenance cost of the asset and amount of that cost will be fully
deducted in the transaction’s sale and purchase if the asset at the
end of the lease period; or
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 647
A (ii) The owner and the lessee may negotiate and agree to decide which
party that will bear the maintenance cost of the asset.
Accordingly, The SAC has decided that the negotiation to determine the
party that will bear the maintenance cost if the asset is allowed, as long
as it has been agreed by the contracting parties.
B [217] With that SAC letter, the High Court then fixed the matter for trial on
22 August 2016, 29 August 2016 and 30 August 2016. However, the
applicant filed an application for a reference to the Federal Court pursuant
to art. 128(2) of the Federal Constitution and s. 84 of the Courts of Judicature
Act 1964 before the High Court but was rejected by the learned judge.
C However, on appeal to the Court of Appeal, the reference was allowed on
15 May 2017, resulting in the High Court on 20 October 2017 making this
reference before us.
[218] On 15 March 2018, this court allowed the first and second interveners
to intervene in this reference.
D
The Questions
[219] At the start of the hearing of this reference, learned counsel for
the applicant informed the court that he would abandon reference question
1(a) as he concedes that Federal Parliament has the legislative competence
E to enact ss. 56 and 57 of the CBMA 2009 (ss. 56 and 57). That being the case,
I now move to reference question 1(b) and (c).
Questions 1(b) And (c)
[220] It is my view that the aforesaid questions are substantially anchored
F on the determination whether ss. 56 and 57 have the legal effect of
encroaching on the judicial power of the courts, hence unconstitutional
having contravened Part IX of the Federal Constitution - art. 121.
[221] The relevant provisions in CBMA 2009 in this reference are ss. 52,
56 and 57 which read as follows:
G
52 (1) The Shariah Advisory Council shall have the following functions:
(a) to ascertain the Islamic law on any financial matter and issue a
ruling upon reference made to it in accordance with this Part;
(b) to advise the Bank on any Shariah issue relating to Islamic financial
H
business, the activities or transactions of the Bank;
(c) to provide advice to any Islamic financial institution or any other
person as may be provided under any written law; and
(d) Such other functions as may be determined by the Bank.
(2) For the purposed of this Part, “ruling” means any ruling made by the
I Shariah Advisory Council for the ascertainment of Islamic law for the
purposes of Islamic financial business.
648 Current Law Journal [2019] 5 CLJ
(2) Any request for advice or a ruling of the Shariah Advisory Council
under this Act or any other law shall be submitted to the secretariat.
57. Any ruling made by the Shariah Advisory Council pursuant to a
reference made under this Part shall be binding on the Islamic financial
C
institutions under section 55 and the court or arbitrator making a
reference under section 56.
Applicant’s Position
[222] The applicant’s position is quite clear and simply this. Sections 56 and
57 in effect take away the judicial power of the High Court from determining D
any question concerning a Shariah matter and gives it to a non-legal body
(SAC) not provided for under the Federal Constitution. Section 56 requires
the High Court to refer any question in relation to Shariah matters to the SAC
for a ruling, which ruling under s. 57 is binding on the High Court. It is, so
to speak, a complete prohibition on the High Court from performing its E
constitutional function of deliberating and deciding on a dispute before it. To
put it simply, the civil courts possess no judicial power to decide on disputes
relating to Shariah matters.
[223] Learned counsel for the applicant in supporting his contention relied
substantially on this court’s decision in Semenyih Jaya Sdn Bhd v. Pentadbir F
Tanah Daerah Hulu Langat & Another Case [2017] 5 CLJ 526; [2017] 3 MLJ
561 (Semenyih). In that case, there was a similar challenge to the
constitutionality of a provision in the Land Acquisition Act 1960 (LAA)
premised on the judicial power contention as in this case. The impugned
provision there was s. 40D of the LAA (s. 40D) which reads: G
(1) In a case before the Court as to the amount of compensation or as
to the amount of any of its items the amount of compensation to be
awarded shall be the amount decided upon by the two assessors.
(2) Where the assessors have each arrived at a decision which differs from
each other then the Judge, having regard to the opinion of each assessor, H
shall elect to concur with the decision of one of the assessors and the
amount of compensation to be awarded shall be the amount decided
upon by that assessor.
(3) Any decision made under this section is final and there shall be no
further appeal to a higher Court on the matter. I
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 649
A [224] The contention there was that s. 40D made it obligatory on the part
of the judge to accept the opinion of the two assessors or elect to concur with
the decision of either one of them if there are differing opinions between the
two assessors in respect of the amount of reasonable compensation arising out
of a compulsory acquisition of landed properties. The legislative intent was
B crystal clear in that the judge cannot be in a position of deciding for himself
as to what should be the reasonable compensation amount as he merely
anoints the assessors’ decision. It was argued then s. 40D was
unconstitutional as it effectively took away the judge’s constitutional function
of judging and gave it to two non-judicial personnel to decide.
C [225] The above argument was sustained by this court and this was how
Zainun binti Ali FCJ (as she then was) rationalised her conclusion:
[51] Wherefore now stands the judge? It would appear that he sits by the
sideline and dutifully anoints the assessors’ decision.
[52] Section 40D of the Act therefore effectively usurps the power of the
D
court in allowing persons other than the judge to decide on the reference
before it. This power to decide a matter which is brought before the court
is known as judicial power and herein lies the rub. What is judicial power?
...
E [95] However in our view, s. 40D of the Act has a wider reach. The
implications of the language of s. 40D(1) and (2) of the Act is that the
assessors in effect take over the judicial power of the court enshrined
under art. 121(1) of the Federal Constitution in deciding on a reasonable
amount of compensation in land reference matters. The judicial power to
award compensation has been whittled away from the High Court Judge
F to the assessors in breach of art. 121 of the Federal Constitution.
[226] Premised on the above reasoning, learned counsel for the applicant
submitted that the judicial power on questions regarding Shariah matters of
the High Court had been taken away and had been given to a non-judicial
body in the form of the SAC. That simply would be unconstitutional as it
G is a breach of art. 121 of the Federal Constitution.
Position Of The Respondent And Interveners
[227] Learned counsel for the respondent from the outset submitted that the
SAC was established with only the power to ascertain and rule on Shariah
H issues and present such ruling to the courts. The SAC, it was submitted,
makes no determination of the case at hand, that determination is left to the
court to apply the SAC ruling to the facts of the case as pleaded by the parties.
Reliance was also made to the manual for references to Shariah Advisory
Council by the civil court and arbitrator, issued by the second intervener, in
which part B, para. 7 states as follows:
I
In answering the questions referred by the Court or arbitrator, the Shariah
Advisory Council is aware that its role is merely to ascertain the “hukum
Syarak” (Islamic law) in relation to the issues where reference is made.
650 Current Law Journal [2019] 5 CLJ
The Shariah Advisory Council does not have any jurisdiction to make any A
finding of facts or to apply a particular “hukum” (principle) to the facts
of the case or to make a decision whether in relation to an issue or for
the case since such jurisdiction is vested with the court and arbitrator.
[228] Reference is also made to the case of Mohd Alias Ibrahim v. RHB Bank
Bhd & Anor [2011] 4 CLJ 654 where the learned judge there held as follows: B
I
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 651
A [229] The case of Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd
[2012] 3 CLJ 249 was also relied on. There, the Court of Appeal expressed
the same sentiments:
[23] Looking at the purpose of s. 56 of Act 707, it is clear that SAC is
required to ascertain the applicable Islamic law to the above Shariah
B Issues. Upon ascertainment of the Islamic Law, the court would then
apply it to the facts of the present case. This approach is in consonance
with the decision in Bank Islam Malaysia Bhd v. Lim Kok Hoe & Anor And
Other Appeals [2009] 6 CLJ 22, where Raus Sharif JCA (as he then was)
stated:
C In this respect, it is our view that judges in civil courts should not
take upon themselves to declare whether a matter is in accordance
to the Religion of Islam or otherwise ...
[230] Premised on the above, it was submitted that ss. 56 and 57 do not vest
any judicial power in the SAC.
D [231] Learned counsel for the respondent also submitted that the reliance by
the applicant on the Semenyih case was misconceived and the reasons are
these. In the Semenyih case, the two assessors were part of the Tribunal in
determining the valuation of compensation amount. Further, that tribunal
disposed the whole matter in dispute and the disputing parties were before
E that Tribunal consisting of a judge and two assessors. Of course, here, there
are no disputing parties before the SAC as they are before the court. In the
Semenyih case, the judge in the Tribunal did not possess any judicial
discretion in that he was precluded from forming an opinion on the
appropriate amount of compensation as he had to adopt the valuation of the
F assessors. As such, learned counsel submitted, Semenyih was correct to find
that s. 40D was unconstitutional and in view of different factual matrix with
the case at hand, it is not applicable here.
[232] Learned counsel for the second intervener in his rebuttal note referred
to a journal article by Enid Campbell titled ‘The Choice between Judicial and
G Administrative Tribunals and the Separation of Powers (1981) FLR 12(1)24’ and
submits that there must be in existence three essential attributes before one
can say a Tribunal possesses judicial power and they are:
(i) Exercising an adjudicative function;
A (a) one in the States of Malaya, which shall be known as the High
Court in Malaya and shall have its principal registry at such place
in the States of Malaya as the Yang di-Pertuan Agong may
determine; and
(b) one in the States of Sabah and Sarawak, which shall be known as
B the High Court in Sabah and Sarawak and shall have its principal
registry at such place in the States of Sabah and Sarawak as the
Yang di- Pertuan Agong may determine;
(c) (Repealed),
and such inferior courts as may be provided by Federal law and the High
C Courts and inferior courts shall have such jurisdiction and powers as may
be conferred by or under federal law.
[238] It is quite clear that s. 40D is a piece of federal law which does not
confer jurisdiction or judicial power on the civil courts to assess the
appropriate compensation amount for compulsory land acquisition and yet
D this court in Semenyih saw fit to strike it down, premised on the ground that
Parliament does not have the power by legislation to undermine the basic
principles of separation of powers and the independence of the Judiciary.
[239] Further, this court in Semenyih, had adopted the minority judgment of
Richard Malanjum CJ of Sabah and Sarawak as he then was but the present
E Chief Justice of the Federal Court, in PP v. Kok Wah Kuan [2007]
6 CLJ 341 (Kok Wah Kuan) where the issue there was whether a provision
in the Child Act contravenes the Constitution. The Chief Justice in no
uncertain terms said this of art. 121 of the Constitution:
[37] At any rate I am unable to accede to the proposition that with the
F
amendment of art. 121(1) of the Federal Constitution (the amendment)
the courts in Malaysia can only function in accordance with what have
been assigned to them by federal laws. Accepting such proposition is
contrary to the democratic system of Government wherein the courts
form the third branch of the Government and they function to ensure
G
that there is ‘check and balance’ in the system including the crucial duty
to dispense justice according to law for those who come before them.
[38] The amendment which states that “the High Courts and inferior
courts shall have such jurisdiction and powers as may be conferred by or
under federal law” should by no means be read to mean that the
doctrines of separation of powers and independence of the Judiciary are
H now no more the basic features of our Federal Constitution. I do not
think that as a result of the amendment our courts have now become
servile agents of a federal Act of Parliament and that the courts are now
only to perform mechanically any command or bidding of a federal law.
[39] It must be remembered that the courts, especially the Superior Courts
I of this country, are a separate and independent pillar of the Federal
Constitution and not mere agents of the federal legislature. In the
654 Current Law Journal [2019] 5 CLJ
A whether cl. 2.8 is Shariah-compliant is the pivotal issue to that liability. The
legal implication of the answer to the Shariah-compliant issue is simply this.
Islamic Banking in this country is regulated under the Islamic Financial
Services Act 2013 (IFSA) since 30 June 2013. Under this legislation, it is
required that persons conducting such business must be licensed and in
B issuing the license, the Minister must ensure that the licensee’s “aims and
operations” would “in no way contravene the religion of Islam”. Hence any
licensed institution under IFSA must operate its business in a way which
would not involve any element which is not approved by the Religion
of Islam. In short, all financial transactions of the respondent must be
C
Shariah-compliant.
[246] Following that requirement, learned counsel for the applicant
contended that if the transaction at hand is found not to be Shariah-
compliant, that transaction is tainted with illegality in that it is a transaction
forbidden by law. That will then bring into play s. 24 of the Contracts Act
D 1950 which provides that any transaction which is forbidden by law is void.
[247] I come now to the question of what defines judicial power. Let me
from outset say that I am in full accord with what is stated by Gageler J in
Palmer v. Ayers [2017] 341 ALR 18 and it is this:
The difficulty and danger of attempting to formulate some all-
E
encompassing abstract of the judicial power of the Commonwealth was
acknowledged from its inception, was repeatedly recognised in judicial
pronouncements throughout the twentieth century and has been
reiterated in this century.
[248] The second intervener posits three essential features of judicial power:
F adjudication of a dispute, finality in determining the whole dispute, and
enforceability of the decision. Given the abstract nature of judicial power,
it is doubtful whether the test for the exercise of judicial power can be
simplified into a checklist of factors.
[249] Nevertheless, the role of the SAC in the present case can be usefully
G
examined with reference to these factors. The specific question of whether
cl. 2.8 of the ljarah facilities is Shariah-compliant, which arose in the course
of the proceedings before the High Court, was referred to the SAC. The effect
of the SAC ruling that the said clause is Shariah-compliant is that the parties
are bound by the clause, and accordingly the cost for the maintenance works
H are to be borne by the applicant. The rights and liabilities of the parties in
dispute have been adjudicated and finally determined by the SAC. There is
no opportunity for the parties to adduce evidence contrary to the SAC ruling,
or to appeal against it. Since the SAC ruling is binding upon the court, it is
artificial to contend that the ruling is not itself enforceable by the SAC; the
I court has no option but to incorporate and apply the substance and effect of
the ruling in making the order and delivering the decision.
656 Current Law Journal [2019] 5 CLJ
[250] Thus, upon an analysis of the substance and true effect of the A
SAC’s role in this case, it is clear that the all three elements of adjudication,
finality, and enforceability are present. Without purporting to pronounce an
exhaustive definition of judicial power, even if one were to apply the test
proposed by the second intervener, the role of the SAC under ss. 56 and 57
would satisfy all the suggested essential characteristics of judicial power. B
[251] According to the greatest latitude to the appellant and the interveners,
even if the function of the SAC does not exhibit the core characteristics of
judicial power, it may arguably be regarded as a “borderline” case.
Borderline functions would form part of the judicial power if they are
ancillary or incidental to its exercise. In respect of borderline functions, a C
contextual approach as used by the High Court of Australia in R v. Davison
[1954] ALR 877 is to be adopted:
... there are many functions or duties that are not necessarily of a judicial
character but may be performed judicially, whether because they are
proper subjects of its exercise. How a particular act or thing of this kind D
is treated by legislation may determine its character. If the legislature
prescribes a judicial process, it may mean that an exercise of the judicial
power is indispensable. It is at that point the character of the proceeding
or of the thing to be done becomes all important. Where the difficulty is
to distinguish between a legislative and a judicial proceeding, the end
accomplished may be decisive. E
[252] The Davison approach reflects the stand taken in the United States
where Holmes J in Prentis v. Atlantic Coast Line Co (1908) 211 US 210 held
as follow:
... the effect of the inquiry, and of the decision upon it is determined by F
the nature of the act to which the inquiry and decision lead up ... The
nature of the final act determines the nature of the previous inquiry. As
the Judge is bound to declare the law he must know or discover the facts
that establish the law. So when the final act is legislative the decision
which induces it cannot be judicial in the practical sense, although the
questions considered might be the same that would arise in the trial of G
a case.
[253] Applying the above approach, I am now duty-bound to refer to the
context in which ss. 56 and 67 are framed and the purpose that the
Legislature intended to achieve.
H
[254] I look at the context in this manner. If there were no ss. 56 and 57,
the learned trial judge would have, in the normal course of event, in a trial
accepted and taken into consideration of respective and conflicting expert
opinions in considering whether cl. 2.8 is Shariah-compliant. His approach
in resolving the conflict would be as set out by Edgar Joseph Jr in Tan Sri
Khoo Teck Puat & Anor v. Plenitude Holdings Sdn Bhd [1995] 1 CLJ 15 at I
p. 30:
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 657
B [255] With the enactment of ss. 56 and 57, it is crystal clear that with the
SAC’s binding ruling, the trial judge’s function of analysing the conflicting
opinions as is done in every deliberation of a judge in a trial has completely
been usurped. There is a complete prohibition on the part of the judge to
determine a substantial issue of dispute between the applicant and the
C
respondent as to the legality of cl. 2.8. The SAC’s ruling is no more an advice
as prior to the enactment of ss. 56 and 57, it is now much more. The SAC’s
ruling for all intents and purposes becomes the ruling of the trial judge. Hence
it must be said that the legislative purpose here is to take away from the civil
courts the judicial power and place it with SAC on issues relating to Shariah
matters.
D
[256] Hence, with respect, I disagree with the contention that Semenyih is
distinguishable to the case at hand. In Semenyih, the learned judge had no
option but to accept the assessment value of the assessors. His judicial power
was taken away in no uncertain terms as to what the compensation amount
E
should be. In this case, similarly the judge’s judicial power to determine
whether cl. 2.8 is Shariah-compliant is also taken away by the binding effect
of the ruling of SAC. In both instances, the judges have been prohibited from
exercising their constitutional duty of judging so to speak. I am fully aware
of the fact that in Semenyih, the assessors are part of the tribunal of three, of
which the judge is a member, deciding the compensation amount. Here,
F
though SAC is not part of the court structure, one cannot ignore the two
important features and they are firstly that the court is obliged to refer such
dispute on Shariah compliance to the SAC for a ruling and secondly that
ruling shall bind the court which includes the appellate courts. These two
features in effect make the SAC very much part of the judicial framework,
G though not ostensibly but in my view substantially. The SAC, though should
be considered as an expert in Islamic law, had by its role of providing a
binding ruling on the courts had in no uncertain term stepped into the sphere
of judicial function which under the Federal Constitution is solely reserved
to the civil courts.
H
[257] Further, I find that there is merit in the contention of the applicant’s
learned counsel that ss. 56 and 57 had scuttled the rights of a litigant to a fair
trial and to due process. These rights involve the right of a litigant to lead
expert evidence on matters requiring the same, the right to cross examine the
experts on their expertise and the right to make submissions to assist the
I court to form a binding opinion on the litigants. Here, the liability of the
applicant is substantially anchored on cl. 2.8 of the ljarah agreements and
658 Current Law Journal [2019] 5 CLJ
with the SAC’s binding ruling the applicant had been deprived of its right to A
lead evidence and argue that cl. 2.8 is forbidden by law and hence his
liability under the agreement is rendered void. It is not insignificant to note
that in Semenyih, respective counsel there were given the right to tender
expert evidence, cross examine the experts and make submissions to the
court. Despite the aforesaid rights, this court held that s. 40D to be B
unconstitutional.
[258] If I may add here, the prohibition of litigants from tendering evidence,
be it expert evidence or otherwise, in a civil trial goes against the grain of
the very notion of fair play, hence breaching one feature of the concept of
“rule of law”. That feature is no less than the basic right of a litigant to C
prosecute or defend its case by being able to call witnesses of his or her
choice, to cross examine opposing witnesses and then making the relevant
submissions before the courts premised on those evidence. That basic right
is available to other litigants in cases unrelated to ss. 56 and 57 regime. To
put it in another way, a litigant would be deprived of a fair trial under the D
regime of ss. 56 and 57 and would in effect be discriminated against in that
the notion of “all are equal before the law” as encapsulated in art. 8 of the
Federal Constitution, has been compromised. The concept of the rule of law
underpins the existence of the basic human rights provided for in our Federal
Constitution and any legislation which impinges on the aforesaid concept can E
and should be struck down.
[259] I am also aware of the contention that civil courts may not be well
equipped in deciding complex issues of Islamic jurisprudence. This much is
made clear by Raus Sharif JCA (as he then was) in Bank Islam Malaysia Berhad
v. Lim Kok Hoe [2009] 6 CLJ 22 where His Lordship said as follows: F
[32] In this respect, it is our view that judges in civil court should not take
upon themselves to declare whether a matter is in accordance to the
Religion of Islam or otherwise. As rightly pointed out by Suriyadi J
(as he then was) in Arab-Malaysian Merchant Bank Bhd v. Silver Concept Sdn
Bhd [2006] 8 CLJ 9 that in the civil court ‘not every presiding judge is a
G
Muslim, and even if so, may not be sufficiently equipped to deal with
matters, which ulamak take years to comprehend: Thus, whether the bank
business is in accordance with the Religion of Islam, it needs consideration by eminent
jurists who are properly qualified in the field of Islamic jurisprudence.
(emphasis added)
H
[260] Similar sentiments are expressed in Sulaiman Takrib v. Kerajaan Negeri
Terengganu (Kerajaan Malaysia, intervener) and Other Applications [2009] 2 CLJ
54, where Zaki Tun Azmi PCA (as he then was) said, at para. [105]:
This court is not an expert in Islamic law. It therefore has to rely on
opinions given by experts in this field. I
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 659
A [261] With respect, that contention ignores the sole reason for the very
existence of the civil courts, and it is this. They exist only to adjudicate
disputes between parties and make an informed decision only after hearing
all relevant evidence including expert opinions and respective submissions.
And with it, there is an appeal framework in place to ensure a correct
B decision is arrived at by the apex court of the land.
[262] Similarly, here, respective parties can advance their cases by leading
expert evidence, subject the same to cross examination and make their
respective submissions before the court makes its decision. It is in my view
that this case is no different to many complex medical negligence or
C construction or intellectual property or trade mark cases handled by various
courts daily in the country where experts’ evidence from respective sides
would be led to allow judges to analyse and then make an informed decision.
Judges are trained to analyse evidence led into courts and in complex issues
where expert opinions are required, respective counsel will provide such
D evidence with their respective analysis to assist the court to make an
informed decision.
[263] Since the preceding sections relating to the establishment and role of
the SAC are not impugned, with the striking down of ss. 56 and 57 of the
CBMA 2009, proposed new provisions need to be put in place to redefine
E the role of the SAC in respect of Shariah questions in proceedings relating
to Islamic financial business. It is significant that in Semenyih, having struck
down s. 40D as unconstitutional, this court issued guidance on the new
procedure to be adopted in proceedings to determine the amount of
compensation and the redefined role of the assessors. I would adopt the same
F approach in this instance.
[264] Where a question concerning a Shariah matter arises in any
proceedings relating to Islamic financial business, it is suggested that the
court retains the option of referring such question to the SAC for its opinion.
In addition to the SAC opinion, parties are free to lead expert evidence in
G support or contravention of that opinion. The court is to consider the SAC
opinion and all the expert evidence adduced in making a determination. In
doing so, persuasive weight ought to be given to the opinion of the SAC,
taking into account its special role as a “statutory expert” (as rightly
described by Low Hop Bing JCA in Tan Sri Abdul Khalid Ibrahim v. Bank
H Islam (M) Bhd [2013] 4 CLJ 794; [2013] 3 MLJ 269). Having evaluated all
the evidence, the court is at liberty to disagree with the SAC opinion, giving
reasons for so doing. This procedure “would in no small way, emphasise the
punctilious nature of (the SAC opinion) and the value their role represents”
(Semenyih at [124]).
I
660 Current Law Journal [2019] 5 CLJ
The Rationale A
[274] The fundamental reason for the division of the powers of Government
into three branches is to ensure a proper mechanism of checks and balances,
in order to avoid tyranny or arbitrary Government. Since the 18th century
Montesquieu, the classic proponent of the principle of separation of powers,
B
cautioned against the great danger if judicial power is joined with either
legislative or executive power:
Again, there is no liberty, if the judiciary power be not separated from the
legislative and executive. Were it joined with the legislative, the life and
liberty of the subject would be exposed to arbitrary control; for the judge
would be then the legislator. Were it joined to the executive power, the C
judge might behave with violence and oppression.
(See: Charles Montesquieu, The Spirit of the Laws (1748) Book XI, Ch 6
at 293).
[275] He went on to warn that, “there would be an end of everything” D
should all three powers be united in the same body. His reasoning is this:
“whilst the Legislature is concerned solely with declaring ‘the general will
of the State’ and the Executive with ‘nothing more than the execution of that
general will’, only the Judiciary applies the laws to particular persons.
Consequently, the true definition of despotism is the uniting of this power
E
with the other two.” (See: Richard Bellamy, The Rule of Law and the
Separation of Powers, Routledge, 2017 (London: Routledge, 2016) at 261).
[276] Our court too had expressed similar view on the importance of checks
and balances to maintain the rule of law. In the case of Bato Bagi & Ors
v. Kerajaan Negeri Sarawak And Another Appeal [2011] 8 CLJ 766; [2011] F
6 MLJ 297 at p. 802 (CLJ); p. 316 (MLJ) this court said this:
With due respect, a piece of legislation passed by Parliament or State
Assembly may be the will of the majority but it is the court that must be
the conscience of the society so as to ensure that the rights and interests
of the minority are safeguarded. For what use is there the acclamation: G
‘All persons are equal before the law and entitled to the equal protection
of the law’ (art. 8 of the FC) when it is illusory. If an established right
in law exists a citizen has the right to assert it and it is the duty of the
courts to aid and assist him in the assertion of his right. The court will
therefore assist and uphold a citizen’s constitutional rights.
H
[277] Thus, “the separation and the consequent exclusive character of the
powers conferred upon each of the three departments is basic and vital - not
merely a matter of Government mechanism” (per Sutherland J in Springer
v. Philippine Islands (1927) 277 US 128 at p. 201). The separation of powers
is a necessary device to provide security against the gradual concentration of
power and to control the abuse of Government. The Government must be I
obliged to control itself. The aim is to divide and arrange the branches of
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 663
A power in such a manner that each may be a check on the other. (See: James
Madison, “The Structure of the Government Must Furnish the Proper Checks and
Balances Between the Different Departments”, The Federalist Papers No. 51
(1788)).
[278] Accordingly, in distributing the powers of Government, it is essential
B
that “all the parts of it form a mutual check upon each other. The three parts,
each part regulates and is regulated by the rest” (See: Blackstone,
Commentaries, Vol. 1, 1765/1979 at 154). Under this system, “if a given
policy can be implemented only by a combination of legislative enactment,
judicial application, and executive implementation, no man or group of men
C will be able to impose its unchecked will.” (See: United States v. Brown (1965)
381 US 437 at 443.)
Separation Of Judicial Power From Legislative/Executive Power
[279] Countries adopting the Westminster model of Government do not
D subscribe to an absolute separation of powers. It has been observed that the
separation between legislative and executive powers is not rigid: the
Executive, for instance, is often empowered by the Legislature to exercise
regulative functions. Moreover, it can be safely said that the executive
mostly initiates legislations with the Legislature only to consider and pass
them into law upon complying with the relevant procedural requirements.
E
[280] However, the partial overlap between functions is confined to the
spheres of legislative and executive powers. The notion that the separation
of powers applies “to a certain extent” has a special application where these
two powers are concerned. The justification for such an overlap is to promote
F efficiency of Government. (See: Sir Owen Dixon, ‘The Law and the
Constitution’ (1935) 51 Law Quarterly Review 590 at 606). It must be
remembered that in a Commonwealth frame of Government, the Executive
is responsible to Parliament. (See: Victorian Stevedoring & General Contracting
Co v. Dignan (supra)). Since the executive body is at all times subject to the
control of the Legislature, the delegation of regulative power by the
G
Legislature to an executive body does not mean that the Legislature has
abdicated a constitutionally vested power. (See: Attorney-General for Australia
v. The Queen [1957] AC 288 at p. 315).
[281] In contrast, questions of judicial power occupy a place apart under the
H constitution due to its special nature. The absolute independence of the
Judiciary is the bulwark of the constitution against encroachment whether by
the Legislature or by the Executive. (See: Attorney-General for Australia v. The
Queen (supra) at p. 315). The importance of judicial power having a distinct
and separate existence was underlined by Sir William Blackstone
(in Commentaries on the Laws of England (supra) at pp. 259-260) by these
I
words:
664 Current Law Journal [2019] 5 CLJ
In this distinct and separate existence of the judicial power … consists one main A
preservative of the public liberty; which cannot subsist long in any state, unless the
administration of common justice be in some degree separated both from the legislative
and also from the executive power. Were [judicial power] joined with the
legislative, the life, liberty, and property, of the subject would be in the
hands of arbitrary judges, whose decisions would be then regulated only
by their own opinions, and not by any fundamental principles of law; B
which, though legislators may depart from, yet judges are bound to
observe. Were it joined with the executive, this union might soon be an
overbalance for the legislative… Nothing therefore is more to be avoided,
in a free constitution, than uniting the provinces of a judge and a minister
of state.
C
(emphasis added)
[282] Quoting the passage from Blackstone above, Deane J in Re Tracey;
ex parte Ryan [1989] 84 ALR 1 said this:
Therein lie the main point and justification of the doctrine of the
D
separation of judicial from executive and legislative powers upon which
the Constitution is structured. To ignore the significance of the doctrine
or to discount the importance of safeguarding the true independence of
the judicature upon which the doctrine is predicated is to run the risk of
undermining, or even subverting, the Constitution’s only general
guarantee of due process.
E
[283] As such, whatever overlap there may be between the exercise of
legislative and executive powers, the separation between these two powers
on the one hand and judicial power on the other is total or effectively so.
(See: Director of Public Prosecutions of Jamaica v. Mollison [2003] 2 AC 411 at
para. [13]). Such separation, based on the rule of law, is a characteristic F
feature of democracies. (See: R (Anderson) v. Secretary of State for the Home
Department [2003] 1 AC 837 at para. [39]). As aptly described by Harrison
Moore (W H Moore, The Constitution of the Commonwealth of Australia, 2nd
edn (Melbourne: Maxwell, 1910) at 101) thus:
Between legislative and executive power on the one hand, and judicial G
power on the other, there is a great cleavage.
[284] It should also be noted that the principle of separation of powers and
the concept of judicial independence have been recognised as sacrosanct,
forming part of the basic structure of the FC. (See: Semenyih Jaya Sdn Bhd
v. Pentadbir Tanah Daerah Hulu Langat & Another Case [2017] 5 CLJ 526; H
[2017] 3 MLJ 561 at para. [90]). It is the duty of the courts to protect the
Constitution from being undermined by the whittling away of the principles
upon which it is based. As such, the judicial power of the Federation vested
in the Judiciary “will naturally be the subject of our special watchfulness
even to the point of jealousy” (See: Lynham v. Butler (No. 2) [1933] IR 74 at I
p. 97).
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 665
A The Implications
[285] Based therefore on a proper understanding of the principle of
separation of powers, these are some of the basic tenets in relation to judicial
powers that must be observed:
B (i) First, judicial power cannot be removed from the Judiciary;
(ii) Second, judicial power cannot be conferred upon any other body which
does not comply with the constitutional safeguards to ensure its
independence; (See: Indira Gandhi Mutho v. Pengarah Jabatan Agama
Islam Perak & Ors and Other Appeals [2018] 3 CLJ 145; [2018] 1 MLJ 545
C at paras. [51]-[53]).
(iii) Thirdly, non-judicial power cannot be conferred by another branch of
Government onto the Judiciary. “No functions but judicial may be
reposed in the judicature”. (See: R v. Kirby; ex p Boilermakers’ Society of
Australia [1956] ALR 163). The Judiciary may not be vested with
D functions that are not ancillary or incidental to the exercise of judicial
power, but foreign to it. Thus, the Executive Government cannot be
“amalgamated with the judicature by the conferral of non-ancillary
executive functions upon the courts”. (See: Re Tracey (supra)).
[286] Parliament is also restrained from reposing any other than judicial
E
power upon the courts. (See: Victorian Stevedoring & General Contracting Co
v. Dignan (supra)). As Taft CJ noted in Hampton v. United States 276 US 394
(1928) at pp. 406-7:
It is a breach of the national fundamental law if Congress gives up its
legislative power and transfers it to the President, or to the judicial branch,
F
or if by law it attempts to invest itself or its members with either executive
power or judicial power.
[287] The power of Parliament to make laws with respect to the matters
enumerated in the Federal or Concurrent Lists of the FC must be understood
in the context of the constitutional scheme as a whole. The entries in the
G
legislative lists are not to be read as a carte blanche for Parliament to make
law contrary to the principle of separation of powers or the exclusive vesting
of judicial power under art. 121. In fact, despite the lists in the FC, the scope
of the Parliament conferring legislative powers to the Executive is not
without limit. (See: Victorian Stevedoring & General Contracting Co v. Dignan
H
(supra)).
[288] In my view, it is therefore a fallacy to suggest that the purported
“flexibility” of the separation of powers doctrine allows an “overlap and
blending” of functions between branches of Government, so that each can
exercise the powers of another. Such suggestion ignores the fundamental
I
separation of judicial power from legislative and executive power. It would
666 Current Law Journal [2019] 5 CLJ
Rule Of Law
[289] The exclusive vesting of judicial power in the Judiciary is also
inextricably intertwined with the underlying principle of the rule of law. On
a basic level, the rule of law requires that the law is capable of fulfilling its
C
function of guiding the behaviour of persons living under it. For persons to
be able to be guided by the law, it is essential that principles of law are
correctly and authoritatively decided. (See: Tan Eng Hong v. Attorney-General
[2012] 4 SLR 476 at para. [16]).
[290] From a broader constitutional standpoint, the rule of law requires that D
every power must have legal limits. Unfettered discretion is contrary to the
rule of law. (See: Pengarah Tanah dan Galian, Wilayah Persekutuan v.
Sri Lempah Enterprise Sdn Bhd [1978] 1 LNS 143; [1979] 1 MLJ 135 at
p. 148, Chng Suan Tze v. Minister of Home Affairs & Ors [1988] 1 SLR 132 at
p. 157). It is for the courts to determine whether the limits of power have
E
been exceeded. As Sundaresh Menon (Chief Justice Singapore) explained in
Tan Seet Eng (supra) at para.[1]):
The rule of law is the bedrock on which our society was founded and on
which it has thrived. The term, the rule of law, is not one that admits of
a fixed or precise definition. However, one of its core ideas is the notion
F
that the power of the State is vested in the various arms of Government
and that such power is subject to legal limits. But it would be meaningless
to speak of power being limited were there no recourse to determine
whether, how, and in what circumstances those limits had been exceeded.
Under our system of Government, which is based on the Westminster
model, that task falls upon the Judiciary. Judges are entrusted with the G
task of ensuring that any exercise of state power is done within legal
limits.
[291] The role of the Judiciary is intrinsic to our constitutional structure and
the modern democratic state. The words of Lord Bingham in A And Others
v. Secretary of State for the Home Department [2004] UKHL 56 at para. [42] are H
a pertinent reminder:
It is of course true that the judges in this country are not elected and are
not answerable to Parliament. It is also of course true, as pointed out at
[29], above, that Parliament, the executive and the courts have different
functions. But the function of independent judges charged to interpret and apply
I
the law is universally recognised as a cardinal feature of the modern democratic state,
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 667
A a cornerstone of the rule of law itself. The Attorney General is fully entitled to insist
on the proper limits of judicial authority, but he is wrong to stigmatise judicial
decision-making as in some way undemocratic.
(emphasis added)
[292] As such, the power of the courts is a natural and necessary corollary
B
not just to the separation of powers, but also to the rule of law. (See: Indira
Gandhi Mutho v. Pengarah Jabatan Agama Islam Perak (supra) at para. [33]).
Approach To Interpretation
[293] The central question to be determined in this reference is whether
C judicial power has been impermissibly vested in the SAC by virtue of ss. 56
and 57 of the Central Bank of Malaysia Act 2009 (“CBMA 2009”).
[294] The approach to be adopted is to interpret the impugned sections of
the CBMA 2009 to discern whether the SAC was intended by Parliament to
exercise judicial power. Such an intention may be express or appear from the
D
nature of the functions assigned. (See: Federal Commissioner of Taxation
v. Munro [1926] ALR 339). It is immaterial whether the label ascribed to the
SAC’s function in the CBMA 2009 is one of “ascertainment” rather than
“determination”. Considering the substance and actual effect of the
impugned provisions can only discover the true nature of their function. It
E is the substance of the provisions that mater, not the form. After all,
“Parliament cannot evade a constitutional restriction by a colourable
device”. (See: Hinds v. The Queen (supra) at p. 227).
[295] A similar view was expressed by Griffith CJ in Waterside Workers
Federation of Australia v. JW Alexander Ltd (1918) 24 ALR 341:
F
It is impossible under the Constitution to confer such functions upon any
body other than a court, nor can the difficulty be avoided by designating
a body, which is not in its essential character a court, by that name, or
by calling the functions by another name. In short, any attempt to vest
any part of the judicial power of the Commonwealth in any body other
G than a court is entirely ineffective.
(emphasis added)
Judicial Power
[296] Against the background of legal principles aforementioned, I now turn
H to the unenviable task of considering the meaning and scope of judicial
power.
General Principles
[297] Judicial power is not to be delimited in a narrow or pedantic manner.
I It extends to all incidental and necessary matters necessary to render it
effective. (See: Boilermakers’ Society of Australia (supra); Mellifont v. Attorney-
General (Queensland) [1991] 104 ALR 89 at p. 94). In determining whether
668 Current Law Journal [2019] 5 CLJ
judicial power is vested in the SAC, the true criterion is not what powers A
are expressly or by implication excluded from the scope of judicial
power, but what powers are expressly or by implication included in it.
(See: Attorney-General for Australia v. The Queen (supra) at p. 319).
[298] Despite many attempts to define judicial power, “it has never been
B
found possible to frame a definition that is at once exclusive and exhaustive”.
(See: R v. Davison [1954] ALR 877 per Dixon CJ and McTiernan J; Brandy
v. Human Rights and Equal Opportunity Commission [1995] 127 ALR 1;
R v. Trade Practices Tribunal, ex p Tasmanian Breweries Pty Ltd [1970] ALR 49;
Palmer v. Ayres [2017] 341 ALR 18 at para. [43]). The amorphous notion of
judicial power seems to “defy or transcend purely abstract conceptual C
analysis”. (See: Tasmanian Breweries (supra)). It is a concept that may more
appropriately be defined “by way of description rather than of precise
formula”. (See: Lynham v. Butler (No. 2) [1933] IR 74 at p. 99).
[299] In light of these difficulties, one would be wary of purporting to lay
D
down a mandatory checklist of essential features of judicial power. There is
no single feature or element that is conclusive of the exercise of judicial
power. The “answer to the question is to be sought by an examination of all
their elements or features”. (See: Tasmanian Breweries (supra) per Walsh J).
(See also: Labour Relations Board of Saskatchewan v. John East Iron Works Ltd
[1949] AC 134 at p. 149 per Lord Simonds LC). E
of the criminal law, that does not stamp the procedure for which s. 669 A
a (2) provides as something which is academic or hypothetical so as to
deny that it is an exercise of judicial power … The fundamental point, as
it seems to us, is that s. 669A(2) enables the Court of Criminal Appeal
to correct an error of law at the trial. It is that characteristic of the
proceedings that stamps them as an exercise of judicial power and the
decision as a judgment or order within the meaning of s. 73. B
F [311] The SAC delivered a ruling to the effect that negotiations to determine
which party should bear the cost of an asset is allowed, as long as it has been
agreed by the contracting parties. The effect of the ruling is that cl. 2.8 of
the Ijarah facilities is Shariah-compliant. The parties are bound by the clause
and as the customer, the applicant is obliged to bear the cost of the major
maintenance works on the vessels as agreed. The basis of the applicant’s
G
appeal against the summary judgment – that the respondent has failed in its
obligation to carry out the major maintenance works – becomes
unsustainable. The central issue in the case has thus been disposed of by
virtue of the SAC ruling. Unlike the Tribunal in the case of Tasmanian
Breweries (supra), the SAC ruling is not a general pronouncement on policy
H matters for the future, but a determination affecting the rights and liabilities
of the parties in the dispute before the court.
[312] Under s. 57 of the CBMA 2009, the ruling is binding on the High
Court. It is not open to the High Court to determine the question of law or
consider expert evidence on the issue. There is also no question of the High
I
Court applying the SAC ruling to the facts. The specific clause in dispute was
672 Current Law Journal [2019] 5 CLJ
referred to the SAC and the SAC had pronounced on its Shariah compliance. A
In this case, the High Court was unable to reach any other possible outcome
on the issue.
[313] In substance therefore, the rights and obligations of the parties in
dispute have effectively been determined by virtue of the SAC ruling. This
B
substantive effect is not annulled by the declaration in the SAC’s ruling and
in the manual issued by Bank Negara Malaysia, that the function of the SAC
is merely to state the Hukum Syarak. The task of adjudication has been
removed from the High Court and assigned to the SAC. On the facts of this
case, the function exercised by the SAC undoubtedly exhibits the first feature
of judicial power as submitted by the second intervener. C
[317] The facts of the present case are, for all relevant purposes, virtually
indistinguishable from that of Semenyih Jaya (supra). The ruling of the SAC
is final as regards the issue of whether the clause is Shariah-compliant. It
cannot be challenged by the parties with contrary expert evidence, nor
reviewed by the High Court, nor overturned on appeal. In exercising this I
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 673
A function, the SAC is not subject to any check and balance mechanism.
Whether the function of the SAC involves judicial power does not depend
on the number of additional issues raised by the parties in any particular
dispute. In any event, on the facts of the present case, it is not apparent what,
if at all, is left of the dispute to be resolved by the High Court. Accordingly,
B the ruling of the SAC also demonstrates the second suggested indicia of
judicial power.
Power To Enforce Its Own Decision
[318] It was contended that the giving of a binding and authoritative decision
does not itself indicate judicial power. The decision must be enforceable by
C
the decision-making body itself. Since the SAC itself cannot enforce its own
ruling, as the argument goes, judicial power still remains with the court for
the SAC decision must be forwarded to the court.
[319] It is interesting to note that in all of the cases cited to support the
D proposition that a binding decision does not judicial power make, the
decisions in question were binding on the parties involved. No authority was
produced in relation to a decision by a non-judicial body which is binding
on the court. The cases cited lend little, if any, assistance to the respondent
and the second intervener, for such decisions are wholly different in nature
from decisions binding on a court.
E
[320] The second intervener relied heavily on the case of Rola Company
(Australia) v. Commonwealth (supra), where Latham CJ expressed the
following view:
The mere giving of the decision is not the action to which the learned
F Chief Justice referred. If a body which has power to give a binding and
authoritative decision is able to take action so as to enforce that decision,
then, but only then, according to the definition quoted, all the attributes
of judicial power are plainly present.
[321] Once again, it is important to appreciate the context in which the
G statement was made. In that case, the Women’s Employment Board was
established by regulation to determine whether a particular work fell within
certain categories, whether women could be employed or continue to be
employed in that work, and the terms of employment such as the hours and
rate of pay. A Committee of Reference reviewed decisions referred from the
H Board. Pertinently, the determination was a finding of fact binding upon the
employer and the women concerned.
[322] The High Court of Australia held that neither the Board nor the
Committee exercised judicial power. Latham CJ explained that:
The decision of an ordinary court that B is bound to pay money to A
I applies a pre-existing standard of rights and duties not created by the
court itself, with the result that there is an immediately enforceable
liability of B to pay to A the sum of money in question. The decision of
the Women’s Employment Board does not create any such liability, nor
674 Current Law Journal [2019] 5 CLJ
A [326] In the present case, the High Court cannot be said to have retained
judicial power by reason of the SAC merely forwarding its ruling to it. The
effect of the SAC ruling will necessarily be reflected in the order of the High
Court on which it binds. It means the determination of the SAC on the issue
referred to it becomes enforceable forthwith. Following Brandy (supra) it is
B impermissible for the decision of a non-judicial body to take effect as an
exercise of judicial power.
[327] Based on the foregoing, it is clear that all three proposed indicia of
judicial power are present on the facts of the present case, namely, the SAC
exercises an adjudicative function, finally resolves the dispute on the issue
C of Shariah law, and gives a decision which is immediately enforceable. The
sting lies in the ruling being binding on the High Court. The function of the
SAC in this case thus falls clearly within what may be termed the core area
of judicial power.
Functions Ancillary/Incidental To Judicial Power
D
[328] Be that as it may and at the risk of repetition, it must be emphasised
the three features discussed above are by no means exhaustive, and that none
of them is determinative of judicial power. The absence of any particular
feature also does not necessarily negate judicial power. The difficulties in
delineating the precise boundaries of judicial power arise because many
E
functions are not exclusive to one particular power, but may be ancillary or
incidental to legislative, executive, or judicial power depending on its
context. One example of a function with a “double aspect” is the
appointment of new trustees. It may be done in the course of judicial
administration of trusts and assets, or as an administrative act in the exercise
F
of Governmental control over public charities. (See: R v. Davison [1954] ALR
877).
[329] The functions falling within this penumbral area has been described as
“a borderland in which judicial and administrative functions overlap”.
(See: Labour Relations Board of Saskatchewan v. John East Iron Works Ltd (1949)
G
AC 134 at p. 148). Thus, it was observed in Boilermakers’ Society of Australia
(supra) (see also Queen Victoria Memorial Hospital v. Thornton [1953] 87 CLR
144 at 151) that:
... a function which, considered independently, might seem of its own
nature to belong to another division of power yet, in the place it takes
H
in connection with the judicature, falls within the judicial power or what
is incidental to it.
[330] As such, while the features outlined above are broadly indicative of
the “paradigm case of judicial power”, as alluded earlier on, they are by no
I
means an exhaustive description of all the functions falling within the scope
of judicial power. The core features of judicial power above relate to the
nature or effect of a particular function. To determine whether a function is
incidental or ancillary to judicial power, one must also consider the purpose
or context of that function.
676 Current Law Journal [2019] 5 CLJ
Approach A
(emphasis added)
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 677
[337] However, on the facts of the case, Mason J found nothing in the nature A
of the Commissioner’s powers “to suggest that its sole, substantial or
immediate object is to aid the court in its function of hearing and determining
cases”. The possibility that inquiries by the Commissioner may yield
information to be presented as evidence in court is merely “consequential
and altogether too remote to enable us to say that the power is incidental to B
the exercise of judicial power” (at p. 457).
Purpose And Context Of The SAC Ruling
[338] The realities of Government and the multifarious character of many
functions call for a more nuanced and contextual approach to judicial power
C
than an identification of its core features.
[339] Consider the function of ascertaining Islamic law in isolation,
divorced from the present facts. Independently, the function may be
consistent with judicial or non-judicial power. The true character of the
function would depend on the purpose or end to which it is used. For D
instance, the ascertainment of Islamic law for the purposes of enacting
Islamic banking regulations would be an exercise of legislative power. If it
is done for the purpose of approving the activities or transactions of a central
bank, it could be regarded as an administrative function.
[340] However, under ss. 56 and 57 of the CBMA 2009, the ascertainment E
of Islamic law by the SAC occurs in the context of an ongoing judicial
proceeding before the High Court. The purpose of such ascertainment is for
the SAC to make a ruling on a Shariah matter, which arose from proceedings
relating to Islamic financial business, and which is referred to it by the High
Court. Because the ruling is binding upon the High Court, the ascertainment F
becomes an integral and inextricable part of the judicial process of
determining the rights and liabilities of the parties in dispute.
[341] Thus, even if (contrary to my finding above) the SAC’s function is
merely one of ascertainment and does not exhibit any core feature of judicial
power, it cannot be regarded otherwise than as ancillary or incidental to the G
exercise of judicial power. In view of its purpose and context, the issuance
of a binding ruling by the SAC undoubtedly falls within the ambit of judicial
power.
Legislative Purpose
H
[342] The legislative purpose behind the enactment of ss. 56 and 57 of the
CBMA 2009 is a commendable one. Given its composition, there is no doubt
that the members of the SAC would possess the requisite expertise in Shariah
law to make rulings on Islamic finance matters. A series of inconsistent court
decisions gave rise to concerns over the need for legal certainty in the
I
industry. The method chosen by Parliament to address this concern is to
remove from the court and vest in the SAC the power to make decisions on
Shariah matters in Islamic finance business (extract from the Hansard of
30 June 2009):
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 679
E
[344] The same point was stressed in Hinds v. The Queen (supra), where the
Privy Council held that the vesting of judicial power in the Review Board
under the Gun Court Act 1974 was unconstitutional. Lord Diplock
explained (at p. 226):
Whilst none would suggest that a Review Board composed as is provided in section
F 22 of the Gun Court Act 1974 would not perform its duties responsibly and
impartially, the fact remains that the majority of its members are not persons
qualified by the Constitution to exercise judicial powers. A breach of a constitutional
restriction is not excused by the good intentions with which the legislative power has
been exceeded by the particular law. If, consistently with the Constitution, it
is permissible for the Parliament to confer the discretion to determine the
G length of custodial sentences for criminal offences upon a body composed
as the Review Board is, it would be equally permissible to a less well-
intentioned Parliament to confer the same discretion upon any other
person or body of persons not qualified to exercise judicial powers, and
in this way, without any amendment of the Constitution, to open the
door to the exercise of arbitrary power by the executive in the whole field
H of criminal law.
(emphasis added)
[345] The constitutional invalidity of s. 57 CBMA 2009, in so far as it vests
judicial power in the SAC, is not absolved by the best intentions of
I
Parliament. Moreover, the same legislative purpose can be achieved through
other methods that do not involve an infringement of judicial power. For
instance, parties to an Islamic finance agreement can agree to submit any
questions of Shariah law to the SAC for determination in the event of a
dispute, and to be bound by the determinations of the SAC.
680 Current Law Journal [2019] 5 CLJ
Should the judge finds himself in disagreement with the opinion of both
the assessors, he is at liberty to decide the matter, giving his reasons for
so doing. These then are to be made clear in place in the proposed new
s 40D.
H
It would in no small way, emphasise the punctilious nature of the
assessors’ advice and the value their role represents.
[349] Persuasive weight ought to be accorded by the High Court to the ruling
of the SAC pursuant to a reference, taking into account its composition,
expertise, and special status as the statutory authority for the ascertainment I
of Islamic law for the purposes of Islamic financial business.
JRI Resources Sdn Bhd v. Kuwait Finance
House (Malaysia) Bhd; President Of Association
Of Islamic Banking Institutions
[2019] 5 CLJ Malaysia & Anor (Interveners) 681